With debt being a major problem for so many people at the moment, there is a need to focus on a solution that will help you move out of debt. If you don’t take the time to focus on your finances, you’ll find that you end up in considerable trouble or debt. There are many solutions available to you when you are looking for a way out of debt but one popular way is a debt management plan.
A debt management plan, or a DMP, will help you to deal with debts that include credit cards, store cards and loans.
When it comes to reviewing your debts, there are some debts that have to take priority. This means that these are the debts that you pay first when you have enough funds to do so. Examples of priority debts include:
- Rent arrears or mortgage payments
- Electricity or gas bills / arrears
- Council tax or council rates bills or arrears
- Fines from Magistrates Court
- Any maintenance payments for children or ex-partners
- VAT or income tax arrears
- TV licence bills or arrears
The reason that these debts should be classed as priority bills is because there are serious consequences of not paying them. Not all of your debts are the same so you need to make sure that you are able to deal with these payments first and foremost.
Know what debts are eligible for a DMP
It is also important to know that you cannot include these debts in a Debt Management Plan, so you need to find funds to pay off any of these debts first and then deal with the other debts that you have which are suitable for a debt management plan.
The non-priority debts are the debts you can deal with when it comes to a DMP and if your main problems are with bills like loans, student loans, credit card debt and so on, this is definitely the option that is worth considering.
You’ll find that a DMP is an agreement, of an informal nature, between yourself and your creditors that sees you paying off non-priority debts. You will be required to pay a certain amount every month and then your DMP provider or agency will take this money and distribute it amongst your creditors.
Many people like this style of debt management because it means that they don’t have to deal with their creditors directly. This is definitely something that many people approve of, and if you are looking to take care of your finances in a more effective manner, this is a solution that is well worth considering.
DMP agencies can make your life easier
Your DMP agency or provider has considerable experience of working in this sector, taking a lot of the stress and strain away from you. There is also the fact that they will have agreements in place with many of the creditors, which means you can be confident of getting the best deal. Anything which helps you pay less money but still clear off your debts has to be seen as a positive step for most people.
It is important to know that a debt management plan isn’t legally binding and this means you aren’t tied to the plan for a minimum amount of time. You have the right to cancel your DMP at any point, and if it will improve your finances to do so, you should do so. Of course, it may be that cancelling your DMP will harm your chances, so you shouldn’t rush into this sort of decision.
There are many people that a DMP will be of benefit to, including people who can afford to pay off their priority debts but who are struggling with their other bills. There is also a lot to be said for calling on the services of a professional to manage your debts and take responsibility for you. Many people also find having a single monthly payment is of benefit, so it depends on your circumstances and financial background.
A debt management plan isn’t always positive though. If you are paying less money off each month, it is likely that it will take longer to pay off your debt. You will also find that many DMP providers will charge you a fee, which is money that could be used to pay off your debt. A lot of people have also found that the presence of a DMP provider is recorded on their credit statement, which may cause problems in the future.
A debt management plan can be a good way to move forward with your finances but you should approach this solution with caution.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.