A Debt Management Plan (DMP) is a debt solution that successfully reduces outstanding personal liabilities and eventually eliminates them through a monthly repayment programme. This is usually set up by a company that specialises in providing debt management services and many of these businesses also provide other forms of consumer credit help. A DMP can make your monthly outgoings more manageable.
This is one of the best options for people who have difficulty meeting their financial obligations. However, there are other options available and suitability will depend on your individual circumstances. A Debt Management Plan will work best for people who owe £5000 or more and can afford to pay at least £100 each month to their creditors.
Your normal household bills will have to be deducted from your monthly income first and the amount that remains is the amount available for your monthly DMP repayments. Normal household bills include, for example, your mortgage, rent, utility bills, council tax, food and groceries, travel expenses and child care. Many of these are classed as priority so they take precedence over payments to creditors.
Whatever amount is left after all these are paid will serve as the starting point for a DMP. The types of outgoings that can be included in a DMP include unsecured loans and overdraft repayments, catalogue payments, charge cards, credit card bills, payday loans and personal loans from finance companies.
How Debt Management Companies can Help
Debt management companies work effectively in two ways. Firstly, they play an active role in helping you to take control of your financial commitments, which primarily deals with the repayment of arrears. These agencies focus on communicating and intervening with creditors and administering payments to them.
Secondly, debt management services involve financial counseling to help you learn how to control future spending. The work of these companies involves explaining the various options to you, including Debt Management Plans, and helping you to choose a custom-made strategy that will enable you to gradually pay off everything you owe to creditors.
The primary concern of debt management companies is to negotiate lower interest rates and easier repayments. Depending on your ability to clear outstanding balances, they can even work with creditors to allow you to pay in full at a reduced sum. These companies can often reach the most beneficial payment arrangements because they have already established good relationships with various creditors.
Should you decide to get professional assistance from an agency, you should initially choose one that will most effectively meet your particular needs. Compare companies through the Internet and read through their specific services carefully. Do they have a wide range of services and are they used to dealing with people in your situation?
Once you have found a suitable company it is easy to apply for help. Many have a simple online form that enables you to submit your details. The company will need to discuss your circumstances further to ensure that they find the right debt solution to suit you so be prepared for a call once you submit your application. To get the right level of help it is best to ensure that you state everything relating to your financial issues.
With the aid of a targeted repayment arrangement that suits your individual requirements you will be well on your way to a healthier financial future. It is important however to be aware of your future spending habits as it is easy to return to the same old practices and repeat the cycle of overspending.