Your Options for Managing Debts
Debt Management Plans
The information provided in this article is to be used as a general guideline. If you are struggling severely with money, visit the Money Advice Service for more information and debt advice.
What is a debt management plan?
Debt management plans (DMPs) are informal agreements made between borrowers and creditors, should you struggle to repay your debts. The agreement allows borrowers to consolidate their non-priority debts into reduced payments every month at an affordable rate. Allowing the outstanding balance to be cleared over time.
What is a debt management company?
Debt management companies help those who are struggling financially to consolidate their debts into one straightforward monthly payment. This payment is then shared amongst their creditors to repay their outstanding debts, helping to make debts more manageable.
Do I have to include all debts in a debt management plan?
It is not a requirement that you include all of your debts in your debt management plan. Instead, it is recommended that you only use a DMP as a debt solution for your non-priority debts. Any outstanding debts you have such as high-interest rate credit and utilities should be repaid as soon as possible.
Flexible Debt Solutions UK
Flexible Debt Solutions are an information hub intended to help individuals who are in serious debt and require relief and support. Offering help by matching you with a professional and authorised debt advisor.
Flexible Debt Solutions can help people who wish to seek help in arranging either an Individual Voluntary Arrangement (IVA), Debt Relief Order (DRO), Scottish Trust Deed, or Bankruptcy.
- Professional debt consultations
- Peace of mind for customers
- Discretion and confidentiality
- From the help from professional insolvency practitioners
If you are experiencing debt but do not wish to make an arrangement such as an IVA, Scottish Trust Deed, DMP, Bankruptcy or a DRO you may wish to instead seek help or free debt advice. You can find the help you need from organisations and charities such as the Money Advice Service or StepChange.
Types of Debt Management Plans
What is an Individual Voluntary Agreement (IVA)?
An Individual Voluntary Agreement, otherwise known as an IVA, is a legally binding agreement between borrowers and creditors, where borrowers must agree to repay their debts within a given time frame. A court approves IVAs, and therefore both borrowers and creditors must stick to the agreement.
What is a Debt Relief Order (DRO)?
A Debt Relief Order (DRO) is an option for dealing with debts if you are unable to repay debt, have a low amount of unsecured debt and have little to no assets of value. A DRO will relieve the borrower of repaying the debt and freeze interest rates for 12 months or until their financial situation improved.
Can I get a credit card while seeking debt management?
While it is still possible to take out credit while you have a DMP, it is advisable against if you are already struggling with debt and cannot afford to repay the money you borrowed.
However, in some circumstances, it may be beneficial to take out a credit card, ensuring you do not max out your credit limit and keep up with regular payments, interest and charges. Demonstrating your ability to use credit responsibly.
Are debt management plans a good idea?
Debt management plans can be great options, providing that you can afford the monthly repayments on your priority debts and living costs as well as repaying your DMP. If you cannot afford to pay your other financial obligations then it is not advisable.
What are the advantages?
There are advantages for debt management products which include, but are not limited to:
- Consolidating your debts
- Affordable monthly repayments
- Freezing interest and charges
- Help managing your debts
- Reduced contact with creditors
- Better your credit file
What are the disadvantages?
Disadvantages of using debt management companies and products include:
- Your debts will not be written off - you will still need to repay them in full
- Some creditors may not accept proposals for DMPs
- Larger debts such as secured loans and mortgages are not covered
- If creditors do not freeze interest rates, it could be an expensive option
- Some debt management companies may charge fees
Will a DMP affect my job?
Debt management products and plans should not have any effect on your job or career prospects.
Can creditors refuse a debt management plan?
Yes, there is no legal obligation for creditors to accept your debt management plan. However, IVAs and DROs have to be approved by a court, therefore they are legally binding agreements that borrowers and creditors have to agree to.
What happens if I can’t pay my debt management plan?
If you believe you are likely to miss a payment or have already missed a repayment, then you will need to content your debt management provider as soon as possible. Being late or missing a repayment can mean your creditors can reject your plan, therefore you'll need to keep up with your side of the agreement.
If you have a Debt Management Plan, you will make payments to your creditors via your debt management company, therefore it is important that you get in touch with them instead of with your creditors.
What else should I consider?
Experian is a credit reference agency and not a debt management company. However, as one of the largest credit reference agencies in the UK, they help to provide the opportunity for their customers to check and understand more about their credit score.
Understanding your credit report and how credit works can help you to manage your credit responsibly, helping you to appear more creditworthy to potential lenders and creditors.
Experian even provides their CreditExpert Service which can actively help customers to build and improve their credit score over time.
- Credit alerts: allowing you to know when you’ve missed a repayment or if any activity on your account has taken place, such as applications or search enquiries.
- Credit summaries: get a breakdown of all your credit applications and amounts that you borrow. Find out exactly how much you owe all in one easy to manage place.
- Improve your score: find personalised tips to help you to improve your credit score and your chances of getting approved for credit in the future.
- A better understanding of your score and report: Get your report and score updated daily, to understand what factors can affect your credit score.
You can cancel your Experian membership at any time should you wish to do so. For more information on how to cancel your subscription, any costs associated with cancellation and refund policies, visit their Frequently Asked Questions page.
Frequently Asked Questions FAQs
What is debt management?
Debt management refers to plans such as a Debt Management Plan, Individual Voluntary Arrangement or a Debt Relief Order, which are arrangements made with creditors when borrowers are struggling to repay their debt. These arrangements ensure that debts are paid cleared in a way that suits borrowers and creditors alike.
How do I get a debt management plan?
You should ensure that you set up your Debt Management Plan with a debt management company who are Financial Conduct Authority (FCA) regulated. The company will then make an arrangement with your creditors on your behalf. Once you have both agreed to the conditions, you'll make regular repayments through your DMP provider.
Why Choose Fablious?
At Fablious we focus on helping the specialist needs of our customers, allowing users to compare and contrast a wide variety of Alternative Finance Solutions all in one place.
If you wish to compare your options on a range of different products, such as Buy Now Pay Later, Deposit Free Renting, Saving Money, and Repairing Credit, why not choose Fablious? And find your perfect Solution today.