Debt can quickly become unmanageable if your repayments are more than you can afford each month. A DMP could help to make repayments more affordable. This step is undertaken by considering your income and reasonable expenditure. After your reasonable expenses are accounted for, the surplus is paid to your creditors through the DMP. Obviously this appears to be a much more desirable situation than being stuck with debt repayments you cannot afford to pay, but looking after your money while in a DMP is a talent in itself.
The whole point of debt solutions is to address an issue rather than simply to create a different one. Frequently on our DMP forum we hear from individuals that are finding it hard to make their debt management plan payment. There are a few common reasons why people may end up in this undesirable situation, in this piece we look at these reasons and some practical solutions.
The first area of advice is do not commit to a debt management plan payment that is more than you can afford to pay. This seems straightforward doesn't it, but many individuals who are pressurised by creditors are susceptible to being talked into committing to a DMP that they don't really have the funds to afford. What could cause this to happen? All DMP operators stand to benefit financially from debtors paying a higher amount. Not all DMP advisors will misuse their authority as lots are responsible, however there are providers that will encourage you to repay a greater amount than you can reasonably afford for their own financial gain.
The next concern is to make sure your requirements really are fulfilled by the expenditure budgets that are set. It's normally quite easy to work out how much we spend on recurring monthly bills for example council payments, rent, mortgage, food etc. Uncommon costs such as school excursions, clothing, home and car repairs, haircuts and taxing your car are still necessities but could be harder to work out. Reputable debt management plan advisors will encourage you to hold some money to one side for these sporadic fundamentals.
Another thing to consider is how you'll plan for these irregular purchases throughout your DMP. You're unlikely to be able to get further credit on standard terms (though payday and door-to-door creditors may offer you finance with an unbelievable APR that causes more bother) so you should have an emergency fund in place. Create another bank account and every month deposit a payment. You can then take this cash to spend on occasional essential purchases. If you are strict about following this there will be money available when a pipe breaks or your children need new uniforms.
What if the unexpected occurs and you are subject to temporary income shock during your debt management plan? Unless you have a strong financial pot we recommend that you rank your payments e.g. rental payments or mortgage over your debt payments if you are made temporarily unemployed. This is because a debt management plan deals with non-priority debts. Your debt management plan supplier, if they're professional, should be able to work with your creditors to buy you a bit longer to find a renewed income source.
What can you do if your spending grows because you are making use of more credit? We don't advise you take out further loans once you agree to a debt management plan. However, if you find yourself in this predicament we suggest that you communicate with your debt management plan professional straight away. Any more debt accumulated throughout the debt management plan could possibly be added to the plan, however this will elongate the time it takes to pay the debt.
If you want your DMP to go as smoothly as possible you should be diligent with your finances and inform your DMP operator immediately if your circumstances change.
The first area of advice is do not commit to a debt management plan payment that is more than you can afford to pay. This seems straightforward doesn't it, but many individuals who are pressurised by creditors are susceptible to being talked into committing to a DMP that they don't really have the funds to afford. What could cause this to happen? All DMP operators stand to benefit financially from debtors paying a higher amount. Not all DMP advisors will misuse their authority as lots are responsible, however there are providers that will encourage you to repay a greater amount than you can reasonably afford for their own financial gain.
The next concern is to make sure your requirements really are fulfilled by the expenditure budgets that are set. It's normally quite easy to work out how much we spend on recurring monthly bills for example council payments, rent, mortgage, food etc. Uncommon costs such as school excursions, clothing, home and car repairs, haircuts and taxing your car are still necessities but could be harder to work out. Reputable debt management plan advisors will encourage you to hold some money to one side for these sporadic fundamentals.
Another thing to consider is how you'll plan for these irregular purchases throughout your DMP. You're unlikely to be able to get further credit on standard terms (though payday and door-to-door creditors may offer you finance with an unbelievable APR that causes more bother) so you should have an emergency fund in place. Create another bank account and every month deposit a payment. You can then take this cash to spend on occasional essential purchases. If you are strict about following this there will be money available when a pipe breaks or your children need new uniforms.
What if the unexpected occurs and you are subject to temporary income shock during your debt management plan? Unless you have a strong financial pot we recommend that you rank your payments e.g. rental payments or mortgage over your debt payments if you are made temporarily unemployed. This is because a debt management plan deals with non-priority debts. Your debt management plan supplier, if they're professional, should be able to work with your creditors to buy you a bit longer to find a renewed income source.
What can you do if your spending grows because you are making use of more credit? We don't advise you take out further loans once you agree to a debt management plan. However, if you find yourself in this predicament we suggest that you communicate with your debt management plan professional straight away. Any more debt accumulated throughout the debt management plan could possibly be added to the plan, however this will elongate the time it takes to pay the debt.
If you want your DMP to go as smoothly as possible you should be diligent with your finances and inform your DMP operator immediately if your circumstances change.
