It is normally suitable for someone who is unable to meet their usual payments to their creditors. A DMP is arranged on your behalf by a third party which can either be a debt charity or a fee charging company. This means that you would make one payment to your DMP provider each month and they would distribute this fairly amongst your creditors on your behalf. If you chose to use a fee charging company, there will usually be set up fees and a monthly management fee which will normally be included within your monthly payment. Secured debts cannot be included in a DMP – so you would need to keep making these payments separately. Decreasing the amount that you pay each month may result in it taking longer to repay your debt and it could cost more in the long run.
Benefits of a DMP
As it is an informal arrangement you can increase payments to clear the debts quicker if your circumstances improve.
In many cases interest and charges can be frozen however this is not guaranteed
A DMP will give you one monthly affordable payment based on your household expenses
A DMP is flexible so payments can be changed to suit your needs
Considerations of an DMP
There is no fixed term
Creditors could continue to take further action against you to recover the debts
You could pay back more than the original debt
As you are not maintaining contractual payments your credit rating will be affected
