A Debt Management Plan (DMP) is a process designed to help those that are struggling to manage their unsecured debts such as credit cards, personal loans, and other types of unsecured credit commitments.
A DMP is generally administered by a credit counselling agency such as Step Change or Pay Plan. They will work with you to create a budget, which will be used to calculate the amount of money you are able to afford to pay towards those debts each month.
Once the budget has been created, the credit counselling agency will contact your creditors to negotiate lower interest rates (or maybe even have them frozen), reduced fees and a more affordable repayment plan that is easier for you to maintain until the debts have been fully repaid. Once the DMP has been created you will then only be expected to make a single payment to the credit counselling agency, which will then distribute the funds to the creditors according to the new agreed terms.
The main goal of the DMP is you help you repay all of your debts in an affordable and reasonable amount of time, while minimising the financial burden of interest and fees. DMP’s are not the right solution for everyone struggling with debt, and the effectiveness of the DMP will largely depend on your financial situation and the ability to stick with the new repayment plan.
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