Key points
- Available anywhere in the UK
- Informal, so you can stop at any time
- Usually for credit cards, loans, overdrafts and catalogues
- Free from several not-for-profit providers
- Creditors don't have to freeze interest, but many do
How does a DMP work?
A provider works out what you can afford after paying your essential bills and priority debts. You then make one monthly payment to the provider, who shares it between your creditors. The plan continues until your debts are repaid, or until you choose another option.
Which debts can go in a DMP?
DMPs are for non-priority debts such as credit cards, store cards, personal loans, overdrafts, payday loans and catalogue debts. Priority debts like rent, mortgage, council tax and energy arrears can't be included and need to be dealt with first.
What does it cost?
Several not-for-profit organisations run DMPs for free. Some commercial firms charge fees, which means less of your payment goes to your creditors, so always compare before you sign.
Pros
- One manageable payment instead of many.
- Creditors usually stop chasing you while the plan is running.
- It's flexible: payments can change if your income changes.
- No minimum debt level.
Cons
- It isn't legally binding, so creditors can still add interest or take action.
- It can take many years if your payments are low.
- Your credit file will show reduced payments or defaults.
- None of your debt is written off.
Frequently asked questions
Is a debt management plan free?
It can be. Several not-for-profit organisations offer DMPs at no cost. Some private firms charge a fee.
Does a DMP affect my credit rating?
Yes. Creditors usually record reduced payments or a default, which stays on your credit file for six years.
Can I cancel a DMP?
Yes. A DMP is informal, so you can stop it or switch to another solution at any time.
Free debt advice is available
You can get free, impartial debt advice from not-for-profit organisations through MoneyHelper's debt advice locator.
Sources and further reading
This guide is general information, not advice, and was correct when last updated. Rules and limits can change. Speak to a regulated adviser about your own situation.