Managing multiple debts can be difficult to keep track of, especially if your debts are with different companies. Having someone help manage this for you can make all the difference - debt management companies do just that.
What is a DMP?
A debt management plan (DMP) is an agreement with a debt management company and your creditors, which allows you to repay your debts at a more affordable rate by making reduced monthly payments. A DMP will put all of your debts into one regular payment plan.
We don’t offer Debt Management Plans (DMPs) at Cabot, but we are happy to work with debt management companies who do offer them. Only in exceptional circumstances would we decline a DMP, for example if we feel the plan would cause you financial hardship.
Should I pay for a DMP?
There are lots of debt management companies available and if you don’t do your research, you can find yourself paying for this service when you could be putting it towards clearing your debts.
Some debt management companies will charge you for their services, whilst others* will pass your payments straight onto your creditors for free. We recommend working with one of the free organisations below who will give you advice on setting up a debt management plan and deal with your creditors for you.
*StepChange Debt Charity and PayPlan are able to offer free debt management plans because they are funded by the credit industry and donations from creditors.
Where to get free help?
If you’re struggling to thinking about a debt management plan, and not sure if it’s the right choice for you, here are some organisations you can speak to, who can give you free impartial debt advice:
How do I apply for DMP?
1. Pick your debt management company
If you’ve decided a debt management plan is the right path for you, first thing’s first is choosing a debt management company to manage your accounts on your behalf. You can see a list of companies we work with here.*
You can use the Financial Services Register to make sure the company you choose is authorised by the Financial Conduct Authority (FCA).
*You are not limited to te companies we recommend; we will work with almost all DMCs offered to us.
2. Work through your budget
Once you’ve contacted your chosen debt management company, they’ll schedule an assessment with you either by telephone or email, where they’ll help you work out what you can afford to pay towards your debts. You’ll be expected to go through your income and outgoings, with your priority bills and living expenses taken into account. This may require you sending in documentation of proof of income or benefits.
If you have a Cabot account, you can use our online Budget Planner tool to work out your budget by filling in your income and expenses and downloading or printing a copy for your records.
3. Agree your debt management plan
Once your essential costs are covered, any money leftover will go towards clearing your debts. You’ll make the agreed monthly payment to your debt management company, who will divide the amount between your creditors on a pro rata basis. This means the creditor who is owed the most will receive the biggest share of your monthly payment. They will manage all payments to your creditors for you and any communications form your creditors will come through them.
Even though your debt management company will liaise with your creditors on your behalf, there are some communications that your creditor will need to send you, for example, your account statements.
If you're struggling with multiple debts and considering a debt management plan, let us know. We'll put your account on hold for a short period of time to give you some time to contact a debt management company and talk through your options.
If you've already spoken with a debt management company and agreed it's the right choice for you, we ask that you get in touch with us with the following details so we can update your account:
• Debt management company
• Debt management reference number
Managing your debt management plan (DMP)
You’ve explored the pros and cons of a DMP, looked into how to set one up, but now you may be wondering what your next steps will be when you have a DMP in place - let us fill you in.
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Is a debt management plan the right solution for me?
Debt management plans (DMPs) are a great way to manage multiple debts if you’re struggling to meet your contractual payments, but they may not be the best option for everyone. Read on to find out if a DMP is the right step for you.
6 minute read