If you have unsecured debts of £1,000 or more a debt management plan (DMP) may be able to help with your debts.
When you are looking into how to solve your debt problems, you hear the term ‘debt management plan’ and many people have absolutely no idea what one actually is, so here you will find out what exactly is a debt management plan?
A debt management plan is an informal arrangement so payments can be changed to meet your circumstances. What this means is that we come to an arrangement with your creditors to repay your debts, but at a rate which you can afford. We do this by looking at your income and expenditure and coming up with a realistic payment plan that is good for all parties – your creditors get paid in full and you can repay your debts without struggling for food or warmth. If your situation changes and you can afford to pay more (or less) you can change your payment amount quickly and easily. Alternatively if at any point you decide you no longer need to be on a debt plan you can cancel at any time, although you will still have any outstanding debt with your creditors.
In many cases we can even have any charges and interest frozen, although there is no guarantee that the creditors will agree to this.
- We will negotiate on your behalf, so you pay a lower, affordable, monthly payment to us, which we divide and distribute to your creditors (minus our fee).
- We will negotiate with your creditors with a view to reducing or freezing your interest and charges. Although this cannot be guaranteed.
- Your plan is flexible so payments can be changed to meet your circumstances.
- If you complete the plan, your unsecured debts will be cleared.
- Making one regular monthly payment allows you better control over your finances.
- Peace of mind – in many cases, you will no longer be contacted by your creditors or debt collectors.
- Creditors don’t have to agree to a debt management plan and may still contact you asking for immediate repayment.
- Mortgages and other ‘secured’ debts are not covered by a debt management plan.
- Will adversely affect your credit rating.
- Your debts must be repaid in full – they will not be written off.
We try to make your life as easy as possible, so we do as much of the work for you as we can. Here’s what happens when you contact us:
- Tell us about your finances and the debts you’re having problems with.
- We’ll recommend a way to get out of debt based on your circumstances.
- If we can help you, we’ll contact your creditors and inform them you’re a customer of MoneyPlus.
Our fees are deducted from the monthly payment you make to us. This payment is called your disposable income and is the amount of money that you have left to spend after we have assessed what your income and expenditure is.
If you commenced your Debt Management Plan (“DMP”) with MoneyPlus, our fees will have been explained to you at the start of your plan. If you commenced your DMP with a different company, you may be on a different fee structure to the one described below. We will have communicated to you at the point we took over the management of your plan what fees you are paying. We may change your fees to our structure described below but we will let you know if we intend to do this.
Our fees relate to the arrangement and management of your DMP. The total fees that we will charge you will depend on the length of your DMP which is reliant on your disposable income, your debt, any concessions we achieve on your behalf in relation to the freezing of interest and charges and you maintaining your payments.
Monthly management fee
We will charge you a monthly, fee being the lower of £44.50 or 49% of your monthly payment, from your first month until your DMP completes or is cancelled. This fee represents the work that we do to manage your DMP, such as distributing your payment across your creditors, communicating with your creditors on your behalf, maintaining arrangements which could freeze interest and charges as well as communicating with yourself. We have capped your monthly management fee so that the majority of your payment to us will always be used to repay your debts.
One-off arrangement fee
Given the work involved in setting up your DMP and negotiating with your creditors, we will charge you a one-off arrangement fee of £299. In addition to the usual monthly management fee this will be deducted from your monthly payment until it is repaid, for up to the first 12 monthly payments from the start of your plan. As mentioned earlier, we will cap the combined management and arrangement fees so that the majority of every monthly payment made goes towards the repayment of your debts.
Case study example
Mr Example owes £10,000 to 9 creditors. Having carried out an assessment of his income and expenditure, we have agreed with him that he can afford to make a monthly payment of £275. This is his disposable income. Mr Example will be charged an ongoing monthly management fee of £44.50 and a one-off arrangement fee of £299.
e.g. For the first three monthly payments Mr Example will pay £275 per month, MoneyPlus will distribute £140.25 to the creditors and MoneyPlus will deduct a monthly management fee of £44.50 and an arrangement fee instalment of £90.25.
On the fourth monthly payment, Mr Example will pay £275, MoneyPlus will distribute £202.25 to the creditors and then will deduct the management fee of £44.50 and the final instalment of the arrangement fee of £28.25.
From the fifth monthly payment onwards, Mr Example will pay £275 and MoneyPlus will distribute £230.50 to the creditors and will only charge a monthly management fee of £44.50.
Overall, assuming Mr Example’s disposable income and circumstances remain the same throughout the duration of his DMP, his debt level doesn’t increase, we manage to get all 9 creditors to agree not to charge any further interest and he doesn’t miss any payments, it will take him 45 months to complete his plan and become debt free. In that time he will have paid £2,301.50 in fees to us.
The first 6 months of your debt management plan are the busiest and the Arrangement Fee covers this period.
Within the first six months, we will have:
- Gone through your I&E and calculated reduced repayment proposals based on what is realistic and affordable.
- Reviewed your draft payment plan.
- Prepared your financial statement.
- Spoken to all your creditors and renegotiated, monthly debt payments that are fair for all.
- Liaised with and provided information to your creditors on your behalf.
- Created a personal log in for you to access our Customer Portal.
Your monthly management fee covers the ongoing cost of managing your account, including:
- Help and support from our customer service team
- 24 hour access to our online Customer Portal.
- Distributing the agreed monthly payments to each of your creditors.
- Answering letters and phone calls from your creditors on your behalf.
- Carrying out a review of your circumstances at least every 12 months (or more often, if necessary) to ensure you are still on a plan that’s right for you.
If you are a resident of the UK, have debts of £1,000 or greater then you could be eligible for a debt management plan.
With a debt management plan we can’t promise that your creditors will freeze interest and charges, and neither can anyone else. However, we have built up a great working relationship with many creditors and we will do our best.
We understand that there are some disreputable companies out there, and you want to be careful with your money. MoneyPlus are authorised and regulated by the FCA (Financial Conduct Authority) and you can view our details on the Financial Services Register
When you are in debt, the people that you owe money to understandably want to get their money back, and they try to contact you to get you to repay. These tend to be automated services, and the longer you are in debt, the more correspondence you receive. From letters to phone calls. From many years’ experience of talking to our clients, we know that these chasing letters and calls are massive causes of stress, and can cause problems in your personal life. From nights sleepless with worry, to lying to your friends and family and denying that there is even a problem. A debt management plan help to alleviate some of the stress and worry. It allows you to get back on top of your finances, repaying your debts while still being able to live a normal life. We will contact all of your creditors and inform them that we are dealing with your case from now on and that they should contact us instead of you. As most of these contact measures are automated it might be possible that not all of them will stop, however should you receive anything from them, simply forward it to us and let us deal with it for you.
As debt management plans are not a legally binding solution, should you have any problems you can cancel at any time, however your creditors are likely to resume any interest and charges which they previously stopped, and you still need to continue repayments to them. Should you still wish to cancel a debt management plan, contact the company in writing stating your desire to stop. If you wish to stop due to further financial trouble, call up your debt adviser, they will be able to help you, for example an IVA might now be the right situation for you.
Simply complete the debt test or phone us on the number provided and wait for one of our trained advisers to contact you. They will discuss your situation with you and help you find the best solution to your debt troubles. Our adviser will further discuss your situation and from this information, together we will decide upon a solution that’s right for your particular set of circumstances. We have built up a great working relationship with many UK creditors and so there is an excellent chance of them accepting the offer of a reduced payment, and in many cases we can even have your creditors freeze any interest and charges that may be added to your account. The letters and telephone calls chasing payment should stop (although not guaranteed on a debt management plan) and you can start to relax in the knowledge that you are clearing your debts. You should complete the form in as much detail as possible and then await our phone call.
As you can imagine, there is a lot involved in setting up and managing a debt management plan, and our fees go towards covering this work.
- A debt management plan will last until all your debts are repaid, unless you are in a position to offer a full and final settlement, which MoneyPlus will negotiate on your behalf.
- We only deal with your unsecured debts including personal loans, credit cards, overdrafts, catalogue debts, etc. You must continue to pay any rent, mortgage, council tax, certain hire purchase agreements and utility bills such as gas, electricity and water, as failure to pay these types of debt could have serious consequences.
- Starting a debt management plan could mean the total amount repaid and the repayment period may both increase.
- Initial set-up fees and subsequent management fees are payable.
- A record of your agreement with us will be held on your credit file for up to six years, therefore your ability to obtain credit in the future is likely to be affected.
- Creditors are not obliged to accept reduced payments or to freeze interest and/or charges, and unless they do so repaying the same debt over a longer period of time will increase the total amount to be repaid.
- Recovery proceedings, including default notices & legal action (which may incur costs), can ensue & we cannot guarantee that any existing or threatened proceedings will be suspended or withdrawn.
Despite the commonly held belief that a debt management plan is a ‘catch-all’ solution, in reality there may be a better solution available for you based upon your individual circumstances. There are many different criteria for determining the correct solution for you, although it mainly comes down to number of creditors and amount owe.
Finding the right debt solution can often be a daunting task – that’s where we come in!
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