Debt Management Plan Pros and Cons 2022

Debt Management Plan Pros & Cons

Choosing a debt solution can be quite difficult as many of them seem similar but they’re intended for debtors in different types of financial circumstances. 

Weighing out the pros and cons of a certain debt solution can really help you understand if it would be suitable for you or not. 

In this post, I’ll be looking at the advantages and disadvantages of debt management plans and outlining how you can use them to determine if a DMP is for you or not. 

What is a Debt Management Plan (DMP)?

A debt management plan (or debt management programme) is an informal agreement between you and your creditors which states that you will make reduced monthly payments towards the debts you have. 

You will keep making these reduced payments until you have repaid your debts in full. 

It’s important to note that unlike most debt relief solutions in the UK, debt management plans are informal solutions. This means that its terms are not legally binding. 

Your creditors can still legally pursue legal action against you even if they have agreed to the debt management plan. 

Another important thing to be aware of is the fact that a debt management plan (or debt management program) does not cover secured and/or priority debts. Some examples of priority debts include council tax bills, mortgage payments, rent arrears, etc. 

If you have any such debts, you can’t opt for a debt management plan to cover them. 

If you have a combination of secured and unsecured debts, then you’re going to have to make payments towards the secured debts separately from your DMP. 

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What are the Pros and Cons of a Debt Management Plan (DMP)? 

I’ve compiled the advantages and disadvantages of debt management plans into this neat little list so you can go through them and make a decision for yourself. 


  • You won’t have to deal with your creditors anymore. If you’ve been being contacted by creditors constantly and you’re tired of it, then a debt management plan is definitely worth considering. This is because once a DMP is accepted and put in place, your DMP provider deals with creditors on your behalf. 
  • You might be able to freeze interest and charges on your debt. Interest rates are very high on unsecured debts and if you can get them frozen, you could reduce the overall amount you’ll be paying back by a lot. Please note, however, that creditors are not obligated to freeze interest and charges if they enter into a DMP
  • Opting for any type of debt solution has a negative effect on your credit score. When you opt for a DMP, your reduced payments will start showing up in your credit file. As a result of this, your credit score. However, if you keep making your reduced payments on time and in full, you will find that your credit score will eventually start to increase. It also shows an initiative on your part to deal with your debts without turning to formal insolvency. 
  • If you only have unsecured debts that can all be covered by a DMP, then it’s definitely something you should consider. This is because if your DMP is accepted, then you’ll only have to make a single monthly payment towards your DMP and it will account for all of the creditors that you have. 
  • Your monthly payments are reduced as part of your DMP. Please note that your DMP provider will ensure that you are only paying what you can afford to pay as part of your monthly payments. This makes debt management plans extremely manageable and flexible. 
  • As mentioned earlier, a debt management plan is an informal solution. This means that it’s not legally binding and is not a solution that leads to formal insolvency. Avoiding formal insolvency in this way can help you because your name won’t show up in any public insolvency register. As a result of this, you will avoid any type of restrictions or difficulties you may have faced otherwise such as regarding employment opportunities. 
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  • While a DMP not being legally binding can be an advantage. It’s also a disadvantage. This is because your creditors are not legally bound by the agreement. While it’s true that you’ll be contacted a lot less by your creditors once your DMP is in place, you can still expect them to call you from time to time as they can legally do so. Furthermore, your creditors can still legally pursue court action against you if they feel that they’re not getting a sufficient enough amount from your DMP. This would not be the case in formal debt solutions such as IVAs or Trust Deeds
  • One great risk of DMPs is the fact that your initial payment offer could be rejected by your creditors. In formal solutions such as IVAs, if a majority of creditors agree to the proposal, then all of the creditors are bound by it. On the other hand, for a debt management plan, you may find that some creditors agree to it whereas others might not. In this case, you’re going to have to deal with the creditors that haven’t agreed to it separately from your DMP. 
  • While a DMP does eventually increase your credit score, the initial effect it’s going to have is lowering it. This is because the payments you make towards your debt as part of your DMP are reduced payments.
  • The duration for a debt management plan is typically much longer than that of other formal debt solutions such as IVAs and Trust Deeds. This is mainly because of the fact that you typically pay off the entirety of the money you owe as part of a DMP. On the other, some amount of debt is written off in formal debt solutions such as IVAs. IVAs typically last five years whereas DMPs can even exceed 10 years depending on the amount of debt you have and the monthly payments you’re making. 
  • DMPs are typically a lot more expensive than other debt solutions. This is because you are usually expected to pay off the entirety of your debt unlike other formal debt solutions. Since no debt is written off, of course, a debt management plan is going to be more expensive. Furthermore, there’s a chance that your creditors may refuse to freeze interest and charges. The interest rates for unsecured debts are typically quite high and you may end up paying a much larger amount of money than what you initially borrowed. 

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Debt Management Plans, Interest Rates and Persistent Debt

I wanted to expand upon the last disadvantage because I feel it’s quite important to explain.

Many brits get stuck in persistent debt without even realising it which is why it’s important that you be aware of it. 

You can become stuck in persistent debt if your creditors refuse to stop charging interest on your debts as part of your DMP

Since you’ll be making reduced payments towards your debts, there is a chance that your debt might be increasing at a faster rate than you’re paying it back. 

If this were to continue without any amendment, you would be paying off these debts indefinitely. 

I highly advise that if your creditor(s) are refusing to stop charging interest on your debts that you sit down and consult with your DMP provider

Look at your income, expenditure and disposable income to find out how much you can afford to pay in monthly payments each month. 

After this, you can determine whether the payments will be enough to keep you out of persistent debt or not. 


Just like with any other debt solution, debt management plans have their unique set of benefits and drawbacks. 

Assessing them thoroughly can play a key role in helping you decide which solution would be right for you.


Do you know your debt free date?
Do you know your
debt free date?
  • Affordable repayments with an end date in sight
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring