We help you to organise your debts and ensure that the secured and priority debts (for example, your mortgage or other debts secured on your home or essential transport) are dealt with first. It is also vital to ensure you have enough income allocated to provide an acceptable standard of living. Any income remaining after this is allocated to the DMP and divided amongst your non-priority creditors (personal loans, credit cards, store cards, catalogues). We will negotiate with your creditors with regards to accepting these payments while pushing for the creditors to freeze interest and charges.
This means that you pay a single, affordable monthly payment that deals with all of your unsecured debt.
We help you to organise your debts and ensure that you have enough money left for you to pay your secured and priority debts, helping you safeguard your home or other essentials.
What are the benefits of a DMP?
- You will continue to pay your secured creditors (e.g. mortgage).
- You pay a single reduced monthly payment, which will be distributed between your unsecured creditors.
- The monthly payment will be determined based on your income, all of your debts, secured expenditure and reasonable living expenses. The monthly payment will therefore be reasonable and affordable.
- Contact from your creditors is reduced and therefore you will have less stress. We will inform your creditors that we are managing the plan for you.
- Interest and charges are often ‘frozen’. While this is not guaranteed, if the creditors do agree then this can help bring the debt down to a manageable level.
- The informal nature of the plan means that, subject to Grass Roots' Minimum Term, you can come out of the plan if your circumstances change in the future.
What are the disadvantages of a Debt Management Plan?
- As the arrangement is informal, your creditors can, in theory, change their mind at any time. However, for clients who maintain agreed payments into the account, this is a rare occurrence.
- Your credit rating may still be harmed. Your creditors have the right to register the fact that that the original agreement with them has not been maintained. You should be aware that your ability to obtain credit will be affected both during and immediately after the completion of the DMP. However, it should be remembered that not taking control of your debt and missing payments without any agreement with your creditors is also likely to have an adverse affect on your ability to obtain credit.
- The plan will usually reduce your monthly repayments, making the one monthly payment into the plan affordable. However, as less is being paid to the creditors it will take longer to pay off each debt.
- Whilst we will attempt to negotiate with the lenders to stop charging interest and making charges, the informal nature of the plan means this cannot be certain. If interest continues to be charged on a debt then the lower payments may not be sufficient to make any impact towards paying the debt or, if less than the interest accruing, the debt may increase while you are in the plan.
