What is a Debt Management Plan (DMP)

If you’re struggling with debt (as I did. You can see my first article here), or are going through all of the options you have to help you get out of debt, then the first thing I have to say to you is:

Congratulations and well done you!

I am fully aware that it may seem like an odd thing to say but if you’re reading this, chances are you’ve found yourself in a tough position. The reason I congratulate you is that you have taken the first step.

Recognizing and accepting the fact that you have an issue with your finances is one of the toughest things you are ever likely to face, and also one of the biggest. The earlier you face it, the better you will be in the end.

It is the first step you have to take in getting your finances sorted and finally getting debt free. Don’t believe me? If you’ve not seen it then please take a moment to look at my article on how I got out of a 15-year debt cycle.

So what is a Debt Management Plan (DMP)?

Quite simply, a DMP is an agreed payment plan between you and your creditors.

They are most suited for those that cannot pay the agreed amounts as per their contract with the creditor, however, are not in a position where they cannot pay at all.

Once a budget has been calculated, Simple Income – Expenditure (Essentials), then if you are still in a position where you have a portion of your income left to go towards your debts, then a DMP may be for you.

Income minus expenditure = monthly dmp payment

What are the benefits of a DMP?

The first and possibly most important benefit of a DMP is that you will finally have some control over your debts and your outgoings. A DMP will include a fixed monthly payment, allowing you to plan your finances and not worry so much about interest or over-limit charges.

Once you have worked through a budget (with your DMP provider), you will know exactly where you stand financially from month to month. You will make one monthly payment to your DMP provider, they will deal with and pay your creditors directly.

Your DMP provider may also be able to negotiate a reduced rate for your debts, be that a reduction in the interest rate or the interest being frozen, either of which enables you to get your debts paid off quicker.

A DMP provider will deal directly with your creditors, reducing those dreaded phone calls and letters.

Are there any risks?

Well, yes.

Unfortunately, nothing is perfect.

When a DMP is arranged through your provider, most creditors will be happy to deal directly with them. You may still receive post or calls from them at times. Although you will be paying off your debt, you will be making reduced payments. As such, some (not all) creditors will still get in touch every now and again. Just be sure to forward all mail to your DMP provider and NEVER make any payments directly to your creditors, always go via your provider.

A DMP provider may be able to freeze the interest on your outstanding debts. Although a positive of a DMP, just be aware that your creditors are NOT obliged to do this.

Creditors are not obliged to accept reduced payments. How much your reduced payments are will be calculated by your provider. Once you have a plan in place, most creditors are generally pretty compliant as they are at least receiving something.

DMPs can only be used to pay unsecured debts. If you currently have anything secured against your home, as an example, this cannot be added to your DMP.

A creditor can still take action to recover any debt you may have with them. This can come in the form of a County Court Judgement (CCJ), although most will generally agree to the terms of the DMP.

A DMP, like any other debt relief plan, will affect your credit score. Do not worry about this in the first instance, the most important thing is to get the debts paid off. Once you have made progress, there are steps you can take to improve your credit score (See my article ‘Your Credit Score and 14 ways to improve it today)

How do I get one?

To set up a Debt Management Plan, the first thing to do is to find a DMP provider.

A quick google search will find hundreds of results and ultimately, the choice of who you go with is yours. Whoever you decide to go with, ensure that they are authorized by the FCA (Financial Conduct Authority).

When you find a provider, find out whether they look at the whole range of debt solutions. Debt management plans are not the only way forward and there are other options out there. Ensure that you have a good discussion with them first to assess the best course of action, for you.

Many DMP providers will charge you setup fees along with monthly ‘management fees’. These companies have overheads and argue that they provide a better service, however, my advice is to seek out a debt relief charity like Stepchange. Debt relief charities are fully trained and will take you through a range of options, finding the one best suited to your situation. Also, they do not charge, either to set up the DMP or to manage it. Ultimately, this enables you to get your debts paid off quicker, without paying the company a percentage.

arrane a dmp withStepchange.org


A DMP is a repayment agreement between yourself and your creditors, put in place via a DMP provider.

When searching for providers, check Debt charities like Stepchange (Others are available). These charities will ensure you get the best help and will not charge you for the privilege. They are well respected by financial institutions and are generally recommended by them if you are having issues with payments.

A DMP is a great step forward to dealing with your debts. It allows you to relax, knowing that your payments will be made every month and that your creditors are happy.

Good luck in your search and I hope you’ve found some use out of this article.

Here’s to a better financial future for all.


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