Many debt management plan (DMP) providers charge a fee for their services but some don't. It's important to remember that if you don't want to pay a fee, you don't have to. You just need to choose a free provider.
This page explains how you can find a free DMP provider and what to think about if you do want to choose one that charges a fee.
Why do some DMP providers charge a fee?
A DMP provider works on your behalf to work out what you can afford to pay, negotiate payments with creditors, and distribute the payments to your creditors each month. Clearly, any organisation or company providing a professional service like this will have costs it needs to cover.
Commercial DMP providers cover these costs by charging fees to their customers. Meanwhile, the free providers, who are normally charities, are paid directly by the banks and credit card companies themselves, meaning they don't need to pass fees on to their customers.
Do you get better service if you pay a fee?
Many fee-charging DMP providers will argue that you'll get a better service by paying a fee. They may also say that because they're being paid by you, rather than by the creditors themselves, they're working in your interests rather than those of your creditors. It's up to you to judge for yourself what you think about these arguments. However, there is no need for you to pay a fee if you don't want to.
Finding a free DMP provider
There are three main providers of free DMPs:
National Debtline
National Debtline is a national telephone helpline which gives free advice to people with debt problems. It will give you advice and send you a self-help pack. If it's appropriate, the adviser can refer you to a free DMP.
StepChange
StepChange is a charitable organisation funded by the credit industry to provide free credit counselling to people in the UK. It offers an initial interview by telephone or in person and then reviews your debt history and provides a recommendation. This can include a debt management plan, which is administered by StepChange.
Payplan
Payplan is a company which provides a free debt management service to people in the UK. It is independent and is funded by the credit industry. It will assess your financial position, suggest a repayment plan and approach the creditors with it.
If you decide you want a free DMP, you might want to contact more than one of the free providers so you can compare their service and decide which one is right for you.
If you decide to choose a fee-charging provider
If you decide to set up your DMP with a provider who charges a fee, there are a few things to watch out for:
your DMP is likely to last longer than if you didn’t pay a fee, as there will be less money from each of your monthly payments going to your creditors
the fees may include a set-up fee, deposit or an ongoing fee that is deducted from your monthly payments, so make sure you're happy with the costs before you sign
however, no more than 50% of the money you pay to a DMP provider should be taken to pay the provider's fees - at least 50% should be passed on to your creditors, and this should increase after the first six months
the costs of administering your DMP should be spread evenly over the DMP
if you cancel your DMP, you might not get a refund of any fees or charges, or you might have to pay a cancellation fee, so check the agreement carefully.
Make sure you do your research carefully and choose the provider who offers the best service for your needs.
Next steps
More information
National Debtline
Tricorn House
51-53 Hagley Road
Edgbaston
Birmingham
B16 8TP
Freephone: 0808 808 4000 (Mon-Fri 9.00am-9.00pm; Sat 9.30am-1.00pm; 24-hour voicemail to request an information pack)
Fax: 0121 410 6230
Website: www.nationaldebtline.org
StepChange Debt Charity
Wade House
Merrion Centre
Leeds
LS2 8NG
Freephone: 0800 138 1111 (Monday to Friday from 8.00am to 8.00pm)
Website: www.stepchange.org
Payplan
Kempton House
Dysart Road
Grantham
NG31 7LE
Freephone: 0808 278 6944 (Monday to Friday 8am to 8pm, Saturday 9am to 3pm)
Email: available through a form on the website
Website: www.payplan.com
FAQs
You'll likely pay an enrollment fee as well as a monthly fee for each credit account in the plan. (Even with those, your overall monthly payment should be lower.) The fees can vary depending on state regulations, but agencies charge $25 to $35 on average.
Do you pay for a debt management plan? ›
Many debt management plan (DMP) providers charge a fee for their services but some don't. It's important to remember that if you don't want to pay a fee, you don't have to. You just need to choose a free provider.
How much does a DMP cost? ›
The fees charged by for-profit DMP providers vary. They are typically around 17% of your monthly payment. Before you start a DMP with a company that charges you, make sure you: Find out what you are paying for.
Is a DMP worth it? ›
A DMP may be a good option if the following apply to you: you can afford your living costs and have a way to deal with any priority debts, but you're struggling to keep up with your credit cards and loans. you'd like someone to deal with your creditors for you. making one set monthly payment will help you to budget.
Does a DMP hurt your credit? ›
But while a debt management plan does affect your credit history, it does not have a lasting negative effect on your credit score. When you agree to close all of your credit accounts, your credit history stops. Lenders and credit agencies like FICO and VantageScore use your credit history to generate a credit score.
How much will I pay on a DMP? ›
The amount you pay is based on your disposable income after taking into account your essential living costs. A DMP is an informal agreement between you and your creditors, e.g. credit card companies, to repay your non-priority debts.
Can you keep a credit card on a debt management plan? ›
Most credit card issuers will require that an account entering a debt management plan be closed. It may be in your best interest to reach out to creditors first and request that your accounts be closed. You may be allowed to keep a card for emergencies or business, though; ask before you sign up.
Do you lose your credit cards after debt consolidation? ›
If you get approved for the card, the creditor will not require you to close your other cards. And even with a debt consolidation loan, you may only face an account closure restriction in some cases.
How long does DMP stay on a credit file? ›
The accounts you are repaying your DMP through will already be listed on your credit report, and once the DMP is complete the marker will be removed and the accounts themselves will be marked as closed – they will then remain listed for six years from the settled date.
What happens if you can't pay DMP? ›
Missing a payment will mean your creditors don't get the monthly payment they're expecting, which may mean they decide to stop co-operating with your DMP. Don't bury your head in the sand, as this will only make the problem worse. Talking to your provider quickly is the only way to get the problem sorted out.
There isn't a fixed maximum debt level for a DMP. What's more important is whether the plan can help the debtor manage and clear their debts in a reasonable amount of time. If someone has a very high level of debt, there is a chance that either the monthly payments or the duration of the DMP would be unrealistic.
Can creditors refuse a debt management plan? ›
If the creditor doesn't want to deal with the DMP provider, they can still take action to recover the money you owe, which might include taking you to court. If this applies to you, ask the creditor why they're not willing to co-operate with the DMP.
Do banks accept DMP? ›
Yes – creditors are under no obligation to accept your DMP. They might do this if they don't want to accept reduced payments or feel you could afford to pay more. If they refuse to negotiate with your DMP provider, it can be worth negotiating with them yourself.
Can I get a loan while on a DMP? ›
It's probably against the terms of your debt management plan (DMP) to take out a loan without speaking to your DMP provider first. This is because - although it may be possible to get a loan during a DMP - it's not usually a good idea.
Can you do a DMP yourself? ›
You can arrange a plan with your creditors yourself or through a licensed debt management company for a fee. If you arrange this with a company: you make regular payments to the company. the company shares the money out between your creditors.
Do debt relief programs charge a fee? ›
Debt relief companies charge fees in exchange for their services. The amount you're charged depends on the company you work with and the relief method you choose. Keep in mind that legitimate companies should never ask you to pay fees upfront — if you're asked to provide this, it's likely a scam.
What is the maximum debt for a debt management plan? ›
There isn't a fixed maximum debt level for a DMP. What's more important is whether the plan can help the debtor manage and clear their debts in a reasonable amount of time. If someone has a very high level of debt, there is a chance that either the monthly payments or the duration of the DMP would be unrealistic.
Can you get out of a debt management program? ›
A debt management plan (DMP) isn't legally binding, so you can cancel it if you feel it isn't working for you.
Do you have to pay for debt consolidation? ›
It's possible to streamline your monthly debt payments into a single payment, lower your interest rate, improve your credit health and pay down credit cards faster. Still, you may also have to pay fees for a consolidation loan, and there is no guarantee that you'll get a lower rate than you currently have.
