Debt Management Plans (DMPs)
What is a Debt Management Plan (DMP)?
A debt management plan is an informal and flexible way of helping you manage your debts and get back on track. A debt management plan involves us working out a budget with you which includes all of your essential household expenses such as your rent, mortgage, utilities and food shopping. The money that is left over will be used to pay the people that you owe money to (your creditors). This is called your ‘disposable income’.
You would pay Angel Advance a fee each month to manage the plan on your behalf. This would include initial contact to all of your creditors to try and agree a reduced repayment for each debt, ongoing contact with your creditors and a dedicated account manager throughout the term of your plan. Please see our frequently asked questions section on our debt management page for more details and examples. All of your creditor payments, as well as our fee, is paid out of your disposable income, meaning that you only have to manage a single payment to Angel Advance each month.
During the time that you are on the plan we will ask you not to take out any further credit. ‘Further credit’ includes the continued use of revolving credit facilities such as credit cards, catalogues or store cards. If you do, your creditors are within their rights to refuse a reduced repayment offer and will probably request full contractual payments (i.e. the original amount/rate of payment that you agreed to when you signed the agreement) towards the debt.
Advantages of a Debt Management Plan:
Debt Management Plan (DMP) Frequently Asked Questions
You will make one, affordable monthly payment into your plan which is worked out by taking all your regular spending (including safety nets for one-off expenses) from your total income. We work with you throughout the plan to ensure your budget allows you to live comfortably
The plan is very flexible, so you can change the amount you pay whenever your income or regular expenses change. For example, if your income drops, then you can lower the amount you pay accordingly.
Our Fees
Our fees for setting up and managing your plan are taken from your agreed monthly payment so there is nothing extra to pay.
Set-up Fee
Whilst we’re setting up your plan, we’ll charge £50 from each of your first 6 monthly payments. This fee covers:
Ongoing Management Fee
After month 6, we reduce our monthly fee to £39.50 each month once the core negotiation work on your behalf is done. This fee covers:
Any fee we charge is capped at 49% of your payment. So, if you need to make a reduced payment, then we ensure more than half of your payment is distributed to your creditors.
If you are unable to pay in any month, then no fee is charged.
There are no other fees for running your debt management plan.
Below is an illustration of the cost of a typical plan:
| Non priority debt | £8,600 |
| Number of creditors | 6 |
| Monthly payment | £185.00 |
| Monthly Set-up fee – Months 1 to 6 | £50.00 |
| Monthly management fee – Month 7 onwards | £39.50 |
| Plan length | 60 months |
| Total amount payable | £11,033 |
| Total fees payable over the period | £2,433 |
In this example, all interest and charges have been frozen
You can include non-priority debts (non-essential bills) in your DMP. This includes:
- Credit cards
- Store cards
- Loans
- Catalogues
- Buy Now Pay Later (BNPL)
- Overdrafts
You cannot include priority debts in a DMP, such as:
- Mortgage arrears
- Rent arrears
- Council tax
- TV licence
- Car finance
- Student loans
- Child maintenance or other court ordered payments
- Tax debts
- Debts being collected by an attachment of earnings
There is no set amount of time that a Debt Management Plan (DMP) lasts for. Usually, how long a DMP lasts depends on:
- How much you owe: If you have a high amount of debt, it will take longer to pay it back.
- How much you can afford to pay towards your DMP each month: Our professional debt advisers will work out a budget for you that includes all of your priority debts (e.g. mortgage, rent, energy bills, etc.). Anything left over is what’s known as your ‘disposable income’. The more of this you have, the more you’ll be able to afford towards your DMP each month, which will make the term shorter.
As a DMP is not a legally binding arrangement, you can make your term shorter if:
- Your circumstances improve (e.g. your income increases or you find ways to spend less) and you increase your payments to the DMP.
- If you earn more, via a bonus or overtime for example, you could make additional payments to reduce your debt quicker.
Keep up to date with our professional budgeting tips via our blog.
You can apply for a DMP with your creditors yourself or through a debt management company. When applying for a DMP with Angel Advance, you will need to:
- Get debt advice: Our debt advisers will start by assessing your financial situation. Contact us or use our online tool for free*, confidential debt advice to see if a DMP is the right debt solution for you.
- Review your options: Once you have completed the assessment, you’ll see which debt solutions you are eligible for (including a DMP). You’ll be given a clear breakdown of payments, how long it may take and the impact on your credit file.
- Set up the DMP: If you decide to go ahead with a DMP, you will need to share your contact details and creditor information with us, as well as any other information we may need to check if the plan is right for you. You also need to confirm that you are happy for us to complete an online identity (ID) check.
- Ongoing management: You’ll have regular reviews to check if your plan is affordable for you and adjust it if your situation changes. You can do this through our online portal, where you can track your plan, payments and balances.
*Our advice is free, but if you sign up for a solution, a fee will apply for some solutions.
Angel Advance offers free debt advice but there is a cost for our Debt Management Plan (DMP). There are several sources of free Debt Management Plans available to all consumers. For further information please visit www.moneyhelper.org.uk. Money Helper is an arms-length organisation set up by the government to be a trusted, free source of information and guidance.
We can include debts such as bank account overdrafts, credit cards, catalogues, store cards, unsecured loans and payday loans.
It is essential that you continue to make payments on secured debts such as mortgages and car hire purchase agreements because if you fail to keep up repayments to these debts, the lender may consider legal action or repossession. You must also maintain payments for priority debts including rent, council tax, gas and electricity as failure to maintain these repayments could lead to (in the case of rent) eviction, or the loss of essential goods or services. For more information, please see our different types of debt page.
You will also still be responsible for paying student loan repayments and payments required by the Child Support Agency.
We account for the need to maintain these payments when we calculate your single, lower, monthly payment.
Once you have signed up to a DMP, our Creditor Liaison Team will negotiate with your creditors and request that interest and charges on each debt are frozen. This means that the money we send them will reduce the balance at a quicker rate. Please note that your creditors do not have to agree to the reduced offer and, in some cases, interest and charges may still be added – but this is rare.
They may also decline your offer if they believe that you are able to pay more than you are suggesting, or you do not maintain regular payments.
As soon as you have given us written permission, we will contact your creditors straightaway to notify them that we are working on your behalf. This should contribute towards reducing creditor contact; however, you may still receive some contact in the early stages of your DMP.
Do not ignore the calls; please notify them that you have now appointed Angel Advance to act on your behalf. Remember, it is our job to deal with your creditors going forward, therefore we ask that you send any letters or statements to us using the upload documents feature in your online account.
Once you have signed up to a DMP, your payments to each creditor will be calculated on a pro-rata basis. This means that whatever money is left over from your essential expenses will be split between your creditors on a percentage basis according to the total amount that you owe to them. Payments will be sent to your creditors within 5 working days of us receiving your payment.
Yes, a DMP can impact your credit score, because you won’t be making the payments you agreed to when you initially took out the debt. If you were struggling to make your payments before setting up a DMP, your credit score will have already been affected. Here’s how:
- Reduced payments: Lenders will report to credit reference agencies when you make reduced payments towards your DMP each month. Arrears will build up over time.
- Registered defaults: Once the arrears reach a certain level, a default will be registered on your credit file. This will show for six years and make it difficult to obtain credit.
Yes, a DMP can affect your credit report. While a DMP itself isn’t usually recorded on your credit file, your creditors may report that you’re making reduced payments compared to your original agreement. This could eventually lead to a default notice.
Sometimes, your creditors will add an Arrangement to Pay (AR) marker to your credit report, which shows other lenders that you’re repaying the debt differently to the original terms you agreed to when you initially took it out.
Having an AR marker is better than missing payments completely, as it shows you’re paying what you can afford to, but it can still lower your credit score. Any entries recorded on your credit report, including AR markers, can remain on your file for up to six years.
You can find more information on credit reports on the Angel Advance website.
Payments to your rent or mortgage are considered a priority so if you keep up with your payments to your rent or mortgage, your DMP should have no direct effect on your home. However, if you want to apply for a mortgage or a new tenancy agreement a DMP may affect this.
No. You must ask our permission before incurring any further debts because increasing your borrowing could mean a DMP is no longer suitable for you and you may need to look at another solution. You’ll struggle to get further credit whilst in a debt management plan anyway because you won’t be able to demonstrate that you can afford to repay it.
Using a debt management company can help make repaying debt more manageable. This can include:
- Affordable payments – Flexible payments according to your income and expenses.
- Negotiation with creditors – We handle all communications with creditors on your behalf, alleviating the burden and stress of dealing with multiple lenders.
- Less interest & fees – In the majority (99.48%) of cases, creditors will stop applying interest and charges, saving you money and reducing how much you pay back.
- Debt advice & support – A debt management company will also provide guidance and support on managing your finances to help you get back on track.
Deciding whether a DMP is the right debt solution for you depends on several factors. For example, a DMP may be a good option for you if:
- You can afford living costs but you are struggling with non-priority debts: You usually cannot include priority debts (e.g. mortgage, rent, council tax, etc.) in a DMP, so if you can afford to pay those but just need help with your credit cards or loans, a DMP may be right for you.
- You’d like someone to contact your creditors for you: If you’d prefer for an intermediary (such as a debt management company) to handle the initial and ongoing creditor contact for you, a DMP may be the ideal debt solution for you.
- You are comfortable with a longer repayment period: Before committing to a DMP, it’s important to know that it may take longer for you to pay back your debts because you’ll be paying less each month.
You can cancel your debt management plan at any time by giving us 28 days’ notice. There is no cost to cancel. If you change your mind within the first 14 days of your plan (cooling-off period), you may be entitled to a refund of any fees that you have paid.