Designed to help consolidate your debt, a Debt Management Plan (DMP) is an informal arrangement that allows you to make one monthly payment based on your available budget. If you’re thinking of setting up a DMP, there are a number of steps you’ll need to follow to ensure the process is as easy as possible. We’re here to help guide you and offer support and advice where needed.

The process of setting up a DMP explained

With the help and guidance of a debt advisor, it’s simple to set up a DMP. If you plan well and have all the necessary information at the ready, creating a DMP takes just a few weeks. As it’s an informal arrangement, it can end whenever you cancel it or when you’ve paid off the debt you owe. Follow the below steps to start managing your debts today.

1. Decide if a DMP is right for you

The first step of the DMP process is to decide whether a Debt Management Plan is the right choice for you. To help you with this, we have a handy debt solutions tool which asks you a few questions then recommends which solution best  fits your situation. 

It’s important to be aware that a DMP generally only covers non-priority debts, which includes credit cards, overdrafts and Buy Now, Pay Later agreements. This is different from priority debt, which is a type of debt that can have serious consequences if you don’t pay it. Examples of priority debt include mortgages, court fines or income tax. 

Take your time to assess what kind of debt you have and whether you are in a position to pay it off in monthly instalments. Make sure to also consider all the pros and cons of a DMP before making your final decision.

2. Work out your budget

If you’ve decided to go ahead with a DMP, the next step is to work out your budget. While your DMP provider will likely help you finalise this, the earlier in the debt management process you can start this, the better, as it will give you a clear idea of where you currently stand. 

To do this, start by working out your average monthly income using any payslips or bank statements to help you. After that, you can calculate your monthly living expenses which includes costs such as rent, utility bills and food shopping. 

Once you’ve deducted your essential outgoings from your monthly income, you will have a clearer picture of how much is leftover to go towards paying off your debts. When you meet with your DMP provider, they can offer guidance on what would be a realistic monthly payment for you.

3. Prepare for your initial consultation

Before your first consultation with your chosen DMP provider, it’s  helpful to have all the necessary documentation ready. This could include:

• Your budget plan
• Proof of income, e.g. bank statements or payslips
• Account numbers for your debts.

These documents will give your debt advisor a clear picture of your current financial situation and what you would be able to pay back each month. From there, they can assess whether a DMP is feasible and talk through your options with you. 

Remember that your debt advisor is there to help and support you, and is happy to answer any questions you may have. At MoneyPlus, we pride ourselves on our customer service and ensure you completely understand what you’re agreeing to before we move forward.

4. Finalise the repayment plan with your provider and creditors

Your DMP provider can take it from here. They’ll draft a proposal with the new repayment terms and make sure you’re happy with it. After that, they’ll contact your creditors on your behalf and negotiate with them.

As soon as you, your creditors and your DMP provider agree, your Debt Management Plan is finalised. From then on, you can start to make payments each month to reduce your debt little by little.

5. Update your DMP provider with any changes

Once you’ve started your Debt Management Plan, support from your DMP provider will continue. They’ll monitor your progress with your repayment and let you know of any updates. If you have any questions or need further support, you can easily get in touch with them to find a solution.

Should there be any changes to your financial situation, make sure you let your DMP provider know as soon as possible so they can make the necessary adjustments to your DMP. Additionally, let them know if you plan to cancel your DMP. As it is an informal agreement, you aren’t locked into anything. Your DMP provider can advise on alternatives if a DMP isn’t working for you.

6. Finish paying off your debt

If you continue with your DMP and pay off all your debt, your repayment plan concludes. You can celebrate being debt-free and maintain the good financial habits you’ve developed.

Our expert advisors will be there to support you throughout the entire process of setting up a DMP. If you have any questions about DMPs or any other debt solutions, don’t hesitate to get in touch with us today.