DMP benefits and things to consider

Benefits of a DMP

• You make one affordable payment a month.
• Your DMP provider will deal with creditors on your behalf.
• Your DMP provider will ask your creditors to freeze interest and charges.
• It can be used as a short-term solution 
  
  

Things to consider

• Creditors don’t have to accept lower monthly payments.
• Creditors don’t have to freeze interest and charges.
• It’ll take you longer to repay your debt.
• Your credit rating is likely to be affected.

While you’re on a DMP, you make one affordable payment each month towards your debts.

Your DMP provider will work out how much money you need to live on. Whatever you have left over will go towards your debts. You don’t need to worry about dividing it between your creditors. This will be done for you.

Your DMP provider will contact your creditors

Your DMP provider will set up your plan. This means they’ll contact your creditors about reducing your monthly payments.

Interest and charges usually frozen

Your DMP provider will ask your creditors to freeze interest and charges. They don’t have to agree to this but they usually do.

A good short-term solution

A DMP is not legally binding, making it a good short-term solution to temporary money issues. Once your situation improves, you can end your DMP and go back to making your full contractual payments.

Let’s look at the things you need to bear in mind about a DMP in a bit more detail:

Creditors don’t have to accept lower payments

A DMP is not legally binding and creditors don’t have to accept lower payments. They could take action against you to try and recover the money you owe in another way e.g. through court proceedings. 

However, creditors will often view a DMP as their best chance of getting their money back. 

Creditors don’t have to freeze interest and charges

Although creditors are expected to consider stopping or reducing interest for people who are trying to sort out their financial struggles, they aren’t obliged to freeze interest and charges. Most do but it’s not a legal requirement.

If creditors don’t freeze interest and charges during your DMP, you’re likely to end up paying more than if you’d kept up with your contractual monthly payments.

It’ll take longer to repay your debt

As a DMP involves making lower monthly payments to your creditors, it’ll take you longer to repay everything you owe. 

Your credit rating is likely to be affected

A DMP is likely to affect your credit score because you’re making reduced payments. This means arrears will build up and they’ll be recorded on your credit report.

Accounts are likely to default while you’re on a DMP and this will also be recorded on your credit file.

Get debt advice to find out if a DMP is right for you. If you want to get clued up about DMPs before getting debt advice, you’ll find lots more information on DMPs on our website.