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Debt Management Plan Payment Holiday – Complete Overview

debt management plan payment holiday

If you’ve entered into a debt management plan but feel that you’re going to have trouble making your repayments, then you could opt for a payment holiday. 

A payment holiday or a ‘payment break’ can often make the difference between your DMP being successful or failing. 

In this post, I’ll be looking at what a payment holiday is, when you should be thinking of getting one and how you can obtain it. 

What is a Payment Holiday? 

A payment holiday, also known as a payment break, would involve you stopping the payments that you had agreed to make towards your DMP

The period for which you stop these payments depends entirely on your financial circumstances as well as what your creditors will agree to. 

Typically, payment breaks can be from anywhere between 1 month to as much as 6 months. 

Of course, all of it is going to depend on your circumstances as well what your agrees are willing to agree to. 

As you can probably imagine, the duration of a debt management plan depends on your debt repayments and how regularly you pay them as well as how much money you pay in each payment. 

Of course, a payment holiday is going to mean that the overall duration of your debt management plan is going to increase. 


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How do I Get a Payment Holiday? 

If you feel that you’re going to be having trouble submitting your monthly payment towards your debt management plan (DMP), then it’s important that you contact your DMP provider immediately. 

You should get in touch with your DMP provider and inform them of your financial situation. It’s a good idea to bring documentation about why you’re unable to make your payments for that month and why you require a payment holiday. 

For example, if you have been made redundant, then you should bring a copy of your termination letter. If you’re self-employed and your business isn’t going so well, then you should bring a copy of your bank statement or a certified letter from your accountant. 

The more solid documentation you bring, the higher the chances of you securing a payment holiday are going to be. 

Please keep in mind that payment holidays are only granted to individuals that need them due to dire circumstances. 

You cannot seek a payment break just because you want to make an unnecessary purchase or want to go on an unnecessary vacation. 

When you apply for a payment holiday, your DMP provider will sit down with you and assess your monthly income and expenditure and give you debt advice accordingly. 

It’s possible that they could negotiate a reduction in your monthly payments and that might be enough for you to sustain yourself and keep making contributions towards your DMP

However, if your DMP provider feels that your application for a payment break is justified, then they will comply. 

Please note that your DMP provider is not the one who will decide whether you get a payment holiday or not, that decision is up to your creditors, i.e., the people who you owe your debt to. 

Your DMP provider will hold a meeting with your creditors and present your case to them. This is why it’s a good idea to provide as much documentation and proof as possible. 

Your creditors will look at your application and determine whether or not a payment break is justified or not. 

Please note that they are under no obligation to approve your payment break. If they feel your case isn’t justified, then they’re not going to accept your application and you’re going to have to keep making your payments as usual. 

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What Happens at the End of a Payment Break? 

I’ve discussed a lot about how you can obtain a payment break, now let’s talk about what happens when it ends. 

When your payment holiday is nearing its end, you will be contacted by your DMP provider. If you’re not contacted by them, you should get in touch with them yourself. 

It’s highly important that you get in touch with them before your monthly payment is due. 

This is because circumstances can change drastically after payment holidays. 

Your financial circumstances may not be the same as they were when you first start your payment holiday. 

This is important and it needs to be discussed and taken into account. 

Once you get in touch with your DMP provider, they will sit down with you and assess your financial situation once again. This will include assessing your monthly income, expenditure, assets as well as your remaining debt. 

Depending on how much spare income you’re making, your monthly payments towards your DMP will be adjusted. 

Again, these new monthly repayments will also have to be agreeable to your creditors in your debt management plan. 

If you’re at your payment holiday’s end and feel that you’re still going to be struggling to make your debt repayments, then it’s important to seek professional help. 

Your DMP provider will definitely be able to give you debt advice on what you should do next. 

This could involve terminating your debt management plan and looking towards other solutions or it could involve reducing your monthly repayments drastically. 

If you feel you need a second opinion other than your DMP provider, then you can opt to contact an independent debt charity such as Payplan or Stepchange

They have professionals who will assess your financial circumstances and offer free debt advice about how to move forward. 

When you’re seeking help regarding your debts, make sure that it’s free debt advice. Always avoid agencies that charge you for debt advice. Furthermore, always obtain information and advice from agencies that are authorised and regulated by the Financial Conduct Authority (FCA).


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Conclusion 

A payment holiday can definitely be a powerful tool you can utilise in order to get some breathing room if you’re having trouble maintaining your repayments. 

Just make sure to utilise the time you obtain well so that once the holiday ends, you’re in a better position to effectively make your monthly repayments towards your debt solution. 

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