A debt management plan is an informal agreement which allows you to manage your finances by making one single monthly payment which is then distributed amongst your creditors.
Benefits:
- Your creditors will be contacted on your behalf to arrange a repayment plan and to make arrangements for dealing with any correspondence
- You'll pay a single monthly payment making money management easier
- In some cases, interest payments may be frozen or reduced, but this is not guaranteed
Things you need to know:
- A debt management plan lasts until all of your debt is clear
- In most cases, the first two payments you make will be retained (subject to a maximum amount per month which will vary from company to company) as an initial set up fee. This means that you will go into arrears (or further into arrears). Following that, you will be charged a monthly administration fee which is usually a % of your monthly contribution
- If you choose to cancel the arrangement, your creditors may revoke any commitment to reducing/freezing interest, therefore increasing the amount you owe
For more information on debt management plans, read our questions and answers.