How Long Does a Debt Management Plan Last? Quick Answer
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A Debt Management Plan is one of the most common ways to get out of debt in the UK. But how long does a Debt Management Plan last and what else do you need to know? We reveal how long some Debt Management Plans can last and other key facts about these debt solutions in this guide.
What Is a Debt Management Plan?
When you receive a debt letter asking you to pay the amount you owe, you might also notice that your debt letter asks you to get in touch and arrange a repayment schedule if you can’t pay the full amount.
What is happening in this situation is the company chasing you for money is offering you to negotiate a Debt Management Plan, i.e. a way to pay back the money over time in monthly instalments. The Debt Management Plan might include additional fees and interest payments.
How Long Does a Debt Management Plan Last?
A Debt Management Plan can last for a few months all the way up to ten or more years. How long a Debt Management Plan lasts for will be determined by a number of factors. You should also be aware that long-term Debt Management Plans are usually not a good option and there are better debt solutions to use which will save you money.
What Influences the Length of a DMP?
There are a number of factors that will influence how long a Debt Management Plan will last. The most obvious ones are the size of your debt and how much disposable income you have to put towards paying the debt off each month. Bigger debts may take longer to pay off, but it is all relative to each debtor depending on how much money they can afford to repay every month.
Other factors that will influence how long it takes to pay debts with a Debt Management Plan the amount of interest being added (if any) and if there are additional admin costs to pay. If you use a third-party to arrange a Debt Management Plan for you, they will likely want a percentage of your payments as well.
Can I Pay My Debt Off Early on a DMP?
If you are already on a Debt Management Plan, you might find that your financial situation has changed for the better and you want it to end sooner. This is usually possible if you pay off the debt. But before you agree to pay off all of the remaining balance, it might be wise to investigate a debt settlement offer.
A debt settlement offer is an offer to pay the debt off in one payment, but it doesn’t necessarily mean paying off everything you owe. Some people get settlement offers accepted by only offering 75% of the outstanding balance.
Similarly, if your financial circumstances change for the worse, you might need to renegotiate the terms of your Debt Management Plan. This might mean you pay less each month, but have to pay for longer and pay other fees for longer.
Other Common Questions About DMPs
How long does a Debt Management Plan last is a common question we hear, but there are many other frequently asked questions you probably want the answer to as well…
Is a Debt Management Plan Just for One Debt?
It doesn’t have to be. You can use it just for one debt, and you will have to if you only have one debt, but it can be used for multiple debts if all creditors come on board with the terms. In fact, some creditors like it if more than one debt is covered under the plan because it means everyone is being treated fairly.
Is a Debt Management Plan a Formal Debt Solution?
No, a Debt Management Plan is an informal debt solution, which means it doesn’t have any legal substance and nobody is made to keep to the terms. But creditors and debtors rarely change their mind if everything is going as planned and payments are made in time.
Where Can I Get a Debt Management Plan?
A Debt Management Plan is an agreement between yourself and your creditor (or collection agency) but sometimes third parties can agree the plan for you. For example, debt charities and debt management companies may offer services to get you a Debt Management Plan.
How Much Does a Debt Management Plan Cost?
If you use a service from a debt management company or accountancy firm, they are going to charge you for their help. The fees can range from a couple of pounds to nearly £100 per month. However, sometimes they can get you a better deal than you would get yourself – sometimes!
Are There Any Free Debt Management Plans?
If you arrange the Debt Management Plan directly yourself, then you can avoid any commercial services and will not have to pay fees. This is the only debt solution that you can fully apply for and secure by yourself.
What If I Am Too Scared to Call and Ask?
Some people are too afraid to call their creditors and ask for a Debt Management Plan. Or they don’t trust their own negotiating skills. In these cases, you should use a debt management company or speak with a debt charity who may do it for you for free!
Is a Long-Term Debt Management Plan Worth It?
Earlier we said that a Debt Management Plan can last for as many as 10 years and more. If your Debt Management Plan lasts for many years, it is likely a bad idea. That’s because other debt solutions can work better. For example, an IVA lasts for five years but also wipes off over half your debt!
Where Can I Learn More About DMPs?
MoneyNerd has published a friendly Debt Management Plan guide for anyone considering this avenue out of debt. Check it out now to understand more about one of the UK’s best debt solutions!