Are your debts are large and the interest being added is a real killer? So you are running to stay still?
A Debt Management Plan (DMP) could be right for you! Many people are in this situation because of cost of living problems.
How a DMP works:
- you pay the firm one affordable payment a month. This is flexible;
- the DMP firm divides up your payments between your creditors;
- almost all creditors freeze interest and don’t add charges, so your debts drop a lot faster.
This article is a Guide to DMPs, so you can decide if debt management is right for you and your family, It looks at what happens in a DMP and how DMPs can be speeded up.
Contents
Overview of DMPs
What debts go into a DMP
Most non-priority debts can go into a DMP. This includes credit cards, catalogues, BNPL, overdrafts and unsecured loans. Also most debts that have been sold to a debt collector.
Secured debts – mortgage, car finance – can’t go into a DMP and need to be paid in full.
Other priority debts such as rent arrears, energy bills and council tax arrears, can’t go into a DMP. You need to get payment arrangements for these in place first. Then you can pay the rest of your debts through a DMP.
The DMP will only get low payments at the start but these can increase when you have repaid some of the priority debts or the car finance.
How much will you pay each month?
This is a key question. Pay too much and you won’t be able to keep up the payments. Pay too little and your DMP may never end.
DMPs don’t tie you into a long-term formal contract. As your life changes, you can pay more or less.
The best way to find how much you would pay to a DMP is to contact StepChange. Be very realistic about your expenses and say Yes when they ask if you would like to save a small amount each month. Many people don’t even need to talk on the phone, as one person said:
I was imagining having lots of difficult conversations trying to justify my expenditure and explain my debts etc but it was actually the complete opposite. All I did was spend an hour or putting a budget together on the Stepchange website, then send off the forms and I was done. I’m now two months down the line and I’ve already paid off more than I had in the previous two years.
StepChange are not pushy. The choice is yours if you want them to set up a DMP. But knowing the amount you would pay a month is important – without it you can’t tell how much difference a DMP will make to your life or how long the DMP will last.
How long will your DMP last?
Here is a calculator that lets you put in how much you will pay at the start, make a guess at what this may change to later and see how that affects how long your DMP will be.
Your DMP could end up being longer, if things don’t go well, or shorter if your finances improve. Which is more likely?
DMPs can also be speeded up, see below.
Low payment DMPs
DMPs are a great option if you expect your situation to improve. Some examples:
- it may take a few months to get a new job after redundancy;
- you are currently on maternity leave;
- the car finance will finish in a few months;
- you have priority debts such as council tax arrears or rent arrears. Here you make large payments to the priority debts and only small ones to your credit cards and loans. When the priority debts are gone, you can pay more to the other ones.
- you want to make affordabilty complaints.
In these situations, it doesn’t matter how low the DMP payments are at the start. They can even be just £1 a month – this is called a token payment Debt Management Plan. Because your DMP payments will get larger, the time to complete the DMP will reduce a lot.
Do you have a better alternative?
Common worries
You may have lots of concerns about starting debt management, including whether interest will be frozen, if you will get lots of calls from creditors, your credit record and how it will affect your partner.
Read The main worries people have about debt management for a detailed look at all of these. Many of them aren’t problems for most people!
Check out the other debt solutions
If your DMP sounds too long then one of the other debt solutions may be better, so look at these comparisons:
- Long DMP or bankruptcy
- DMP or an IVA (it’s best to avoid an IVA unless you have a house with equity or a car worth over £4,000)
- a Debt Relief Order (a DRO could be your best option if you are renting and your debts are less than £30,000 – this is going up to £50,000 in June 2024).
You don’t have to rush into a decision, but if your debts are getting larger every month, then don’t delay – or you will just have a bigger problem to solve.
How to set up a DMP (and some variations)
Use a DMP firm
If you use a company to set up your DMP, this works as follows:
- you phone the firm and they talk through your debts and your income and expenditure. Be realistic about your expenses;
- you agree on a monthly payment with the firm;
- you stop paying your debts and set up a monthly payment for this amount to the firm;
- the firm writes to your creditors and every month divides up your monthly payment between them
- there is an annual review to see if your payments should change, but you can ask for changes earlier if you want.
Basically you make one payment per month to the firm and the firm handles everything else.
Choosing a DMP firm
There are three major providers of free DMPs in Britain: StepChange, Payplan and CAP. If you go to one of these, all your monthly payment goes to pay off your debts.
Never use a DMP firm that charges a fee. These commercial debt management firms do exactly the same as free firms – except their fees mean less goes to your debts so the DMP goes on for longer. Fee-charging DMPs are no better than free DMPs.
See Choosing a Debt Management company for more details.
Payment arrangements – like a DMP that you run yourself
If you only have one or two creditors, just phone or write to them to reach an agreement about lower monthly payments and freezing interest. This is often called making payment arrangments.
When you have more creditors, read Running your own DMP which explains how the free CABmoney facility can help with this by doing the calculations and generating the letters.
The advantages of doing this yourself and not using a DMP firm are:
- you may feel you are more in control;
- you don’t have to explain your finances to a DMP firm.
The disadvantages are:
- you have to talk to your creditors at the start and when anything changes;
- some creditors only set up arrangements for 6 months, so you have to keep doing this;
- you have more payments to make each month;
- it has the same effect on your credit score as a DMP.
What happens during a DMP?
In the first year
Before it starts, you should cancel the payments to your creditors.
You may continue to get letters and calls for a month or two at the start. These do stop! Keep telling them you are in a DMP and don’t agree to pay them any more money.
This is what one reader said about his StepChange DMP:
It’s taken a bit of getting used to but it it has made things much easier to manage as the debt payment is now more like a mortgage payment. It gets taken as soon as I’m paid and then I can easily budget what’s left, rather than the daily juggling between cards that I had before.
If you get a letter saying your debt has been sold to a debt collector, this doesn’t change your DMP at all. Tell your DMP firm and they will switch to paying the new debt collector instead.
After a few months, check to see if all your creditors have frozen interest. Most do! Many people will find all their creditors have. But if you have one or two creditors that haven’t, read What to do if a creditor doesn’t freeze interest. You can complain – leave a comment below if this is a problem.
Your DMP should be reviewed at least once a year, see Having an annual DMP review for details.
Credit ratings
If you are thinking of a DMP or are in the early stages, read How a DMP affects your credit rating.
Mortgages
If you are worried about a mortgage:
- Can you get a mortgage in a DMP?
- Most people in a DMP can get a new fix from their current lender, see Can I get a new mortgage fix with poor credit?
If things aren’t going well
If you are struggling, talk to your DMP firm, don’t wait for your annual review.
Debt management is flexible so if things don’t go well you have options, including changing your payments or stopping the DMP and choosing a different debt solution:
- Can your DMP monthly payment be reduced if you are struggling?
- also look at other options such as a Debt Relief Order. Your DMP firm will be able to tell you if you should think about switching to a different debt solution.
Don’t borrow more money to try to get by – on a DMP you will find it very difficult to be able to repay new debts.
Speeding up your DMP
A DMP may sound long at the start but there are various ways to speed it up:
-
- affordabilty claims in a DMP -you can make these claims in a DMP. They are a very good idea – if you win an affordability complaint, your DMP will finish sooner. Many people starting a DMP should look at affordability complaints about the debts in the DMP and any others that have been settled in the last few years.
- Full and Final Settlements – when a DMP has been running for a while and some debts have been sold to debt collectors, they may take a lower settlement offer.
- your pension and your DMP – your pension doesn’t have to be used to pay your debts. I am not recommending this, but it is an extra option.
- What happens if you inherit money? The good news is that you can choose what to do with the money. Making settlement offers is a good idea!
- if your DMP has been going for years, has a lot longer to go and your debts have been sold to a debt collector, read When to ask for a CCA agreement? and think if that may help. The older your debts are the more likely it is to work.
Articles about debt management plans
Can you reduce your DMP payments?
No credit checks for new mortgage fixes?
Shanu says
Hi
Currently I’m under debt mangement plan & my husband also has nearly £40000.00 debt now.we have a morgage as well.if he join to debt mangement plan will it affect for our morgage.we have 4 years old children.
Sara (Debt Camel) says
Hi Shanu – that is a lot of debt your husband has and as you also have problems I think you need some good debt advice. I suggest you and your husband should both talk to StepChange https://www.stepchange.org/, they can help you look at what you best options are.
But basically you have no chance of being offered a mortgage with that amount of debt. And you won’t be able to save up a deposit with it either. So you need to look at practical ways to get the debt down, not worry about some mortgage in the future that is just a daydream.
Sophie Murphy says
Hi, I have an outstanding account with pay day I’m for over £1200 .
I need to start repaying it alongside other loans which are outstanding.
What’s the best way to go about this, will they send debt collectors?
Sara (Debt Camel) says
Hi Sophie, I suggest you contact StepChange about setting up a plan to repay your outstanding debts. See https://www.stepchange.org/.
In addition, I suggest you put in affordability complaints to Payday UK and any other payday lenders or other lenders who gave you loans which you couldn’t afford to repay without borrowing again. See details including template letters here https://debtcamel.co.uk/payday-loan-refunds/. This may result in the interest being removed from your outstanding balance to Payday UK, making it much quicker to repay.
Payday UK aren’t going to send debt collectors to your house and they can’t send bailiffs unless they first go to court to get a CCJ. And a lender can’t take you to court whilst you have an affordability complaint being considered.
Michelle says
I have debt of 26000 and now going to StepChange to try to set things out do you think £400 a mo th will be enough to set up a plan?
Sara (Debt Camel) says
If interest is frozen on all your debts, that would take about 5 years to pay off. That is a sensible sort of time – if it was 2 years you probably don’t need a DMP at all and if it was 10 years then you should be looking for a better solution.
So the question is, is £400 what you can realistically afford to pay? StepChange will be able to to advise on that
Interest normally is frozen – see https://debtcamel.co.uk/creditor-wont-freeze-interest/.
Harry says
Hi
Just wondering, if I go into a dmp what will happen to my guarantor with regards to my George banco loan?
Sara (Debt Camel) says
guarantor loans are complicated … have you read the article about guarantor complaints? https://debtcamel.co.uk/how-to-complain-guarantor-loan/. That’s the best place for questions.
PS the good news is the Ombudsman is upholding 90% of guarantor loan complaints!
Samantha says
Hi me and my Mum are looking for advice, we are both currently in DMP plans through StepChange. I am out of work long term due to mental illness, but my Mum is still trying to get work. I owe around £17,000 where as my mum’s is only around £11,000 (credit cards/loans)
I currently pay £70 and my mum is paying £60 a month, we are wondering if the DMP is best solution long term? as it’s going to take more than 10 years for both of us to clear the debt.
My Mum has a private pension pot from working with the NYCC, which currently sits undrawn, but she’s concerned if we consider insolvency options she may loose it? what are the options here please for us to consider for clearing this debt?
Sara (Debt Camel) says
How long has the DMP been going for?
How old is your mum?
Are you renting, is the tenancy in her name or joint? private rented or council/housing association?
Samantha says
Hi thank you for he reply we’ve had it for about a year but it will take over 10 years plus for both to clear I think mine works out at 19 and my mums is 15 years
We are not renting as we live at my Dads address which is housing association and the tenancy is in his name we are trying to move but it’s difficult with us being on benefits and we’re too low priority on local housing list.
Sara (Debt Camel) says
does your Dad live there or has he moved out and you can just stay there? The reason I am asking is it is a lot harder to rent privately if you have had a debt releif order in the last 6 years.
Insolvency is obviously an option for you if you are long term out of work because of mental health problems. That can never be affect your mum’s pension.
How old is your mum? Is her pension a “money pension” or is it linked to her last salary?
Samantha says
Hi thank you so much for your response apologies for not being able to get back to you
We are allowed to stay as long as we like, we contribute to household costs and split broadband costs etc
We were wanting to move out but I’m not longer sure if that would be a viable option due to my health issues and now being on ESA and a disability benefit.
My mum is currently 54 but she will be 55 in July, I believe it was linked to her salary? the pension was provided through the NYCC themselves when my mother was employed by them, she no longer works for them and she no longer pays anything into it as the contributions would be taken out of her salary monthly.
If it helps we live in the UK and hers would be classified as an Employer’s Pension
Sara (Debt Camel) says
In that case I think you should both talk to National Debtline about your options, they can look at your incomes and expenses in detail – phone 0808 808 4000.
Your mum’s pension pay not be a problem at all, but as she is coming up to 55 it would be better to get advise immediately, not delay.
Mike_p says
I’ve recently started a debt management plan with Stepchange and it’s the best thing I’ve ever done. I put it off for a long time as I was imagining having lots of difficult conversations trying to justify my expenditure and explain my debts etc but it was actually the complete opposite. All I did was spend an hour or putting a budget together on Stepchanges website, then send off the forms and I was done. I’m now two months down the line, all my lenders have agreed to reduce interest and I’ve already paid off more than I had in the previous two years.
It’s taken a bit of getting used to but it it has made things much easier to manage as the debt payment is now more like a mortgage payment. It gets taken as soon as I’m paid and then I can easily budget what’s left, rather than the daily juggling between cards that I had before.
Sara (Debt Camel) says
That’s a very helpful report for other people reading this.
Vicki says
Hi,
I am with a debt management plan. I pay £90 a month and they take £45 of that in fees. They aren’t that invasive, we go through any changes annually and I sent in my wage slips. I have 4 years left on my DMP but it could be 2 if they weren’t taking a fee. Could I leave the dmp and contact one of the resources you have suggested?
Sara (Debt Camel) says
Who is the plan with?
You can easily switch to StepChange and not pay fees.
Martin says
Hello! I already have a DMP in place which is managed by StepChange. Can I still use your refund templates to request refunds for irresponsible lending? I think some of my creditors should have not approved my loan/credit card applications as I was already knee deep and was behind with payments through other providers. Would that affect my DMP? Thanks!
Sara (Debt Camel) says
yes you can! In many ways this is the ideal time to make a claim as the DMP puts you in a safe financial position.
Making this claim won’t affect your DMP – if you win a claim for a debt inside the DMP it will be reduced / cleared and your DMP firm will rejig the DMP. If you win a claim for a debt outside your DMP (eg one that has already been repaid) then you get the cash. You can then use that to settle debts in the DMP if you want.
And no creditor is going to say – as you have made a complaint i wont accept your DMP offer – that never happens.
Claire says
Looking to get a dmp with Step Change but worried about remortgaging when our fixed rate ends November 2025. I can pay a good chunk (£600) to the DMP each month and can up that next year when our childcare cost reduces, so that’ll help speed things up. Just scared of coming to remortgage and it’s a huge issue, have read mixed responses on this, some people say they look at the bigger picture and if I’ve managed the DMP well it’ll be ok. Should I just speak to them directly? Thanks
Sara (Debt Camel) says
When your mortgage fix ends, will you just need another fix or a remortgage eg borrow more, change the term etc?
Claire says
Hi Sara, yes we want to move at some point so would it be detrimental to have a DMP if needing to remortgage and borrow more? We’d likely stay with current provider who we’ve been with for 10 years and never missed a mortgage payment
Sara (Debt Camel) says
Well it depends when you would be likely to want to move When you get the next fix or several years later? And how fast a DMP would clear the debts.
So how large are the debts that would go into the DMP?
Also can you make the minimum payments if you don’t have a DMP? How much of the debts are credit cards are loans and how much cards or catalogues?
Claire says
It’s saying it’d clear in 4 years 7 months but as I can pay more next year that’d reduce. We may want to move at next fix yes. The amount is £33000 thats across 2 x credit cards and then loans. I can manage to afford everything apart from the credit cards now as their 0% rate is expiring so the minimum payment is huge
Sara (Debt Camel) says
Any arrangements to pay less to your creditors will hurt your credit score. A payment arrangement you make is just the same as a debt management pln through StepChange.
it is unlikely that you have any options that won’t hurt your credit score. (A consolidation loan for cards coming off 0% will almost certainly cost more a month than you can afford and you may simply be rejected as it would be unaffordable. )
Most mortgage lenders (97% of the market) have agreed with the Treasury that if a borrower only wants a new fix, not a new mortgage, that the lender will not make any affordability / credit checks for the new fix.
However if you want to move when your current fix ends, then the DMP is very likely to be a problem with getting a new mortgage from Barclays or any other high street lender. And the same would apply if you set up payment arrangements yourself rather than a DMP.
Most lender will want to see that your DMP has finiashed for some time beafore a new mortgage application. One year used to be standard – but during the pandemic that went up and it may be longer at the moment as the mortgage market is in a state iof flux.
I am afraid you cannot assume your loyalty to Barclays will help you in getting a larger mortgage.
But the bottom line is what other option do you have? I assume you do not want to sell now and repay yopur debts… Then if you cannot make the minimum payments the best thing is to minimise the impact and try to pay much more into the DMP next year so that it finaishes as soon as possible.
It may be you have to take a new 2 years fix in 2025 and move at the end of that. But that is a long way off, you have to do the best you can now for your familiy.
Kerrianne says
Hi I have just started a DMP with stepchange my debt is just under £16000 , I am paying £354 per month which will increase towards end of the year but at present it’s expected to be finished in 3 years.
Is it likely that creditors won’t accept the offer of a DMP? The thought of CCJ’s and court makes me very anxious but I will be paying what I can afford worked out by stepchange.
Sara (Debt Camel) says
Most creditors just accept DMP offers. You can complain if they don’t freeze interest and not add charges. Come back and say if you have a problem in practice, very few people do.
The minimum payments were more than £354 a month?
Wilma says
Hi Sarah I am in thr process of setting a DMP with stepchange. They have asked for my payslip and a bank statement. In my bank statement i still have a remaining balance of £750 is that going to be a problem? Are they gonna ask me to move it towards payment? I am saving it for emergencies
Sara (Debt Camel) says
No I don’t think that will be a problem
Jonathan says
This is on the table for me, but my bank where I am in credit card debt and in my overdraft said to hold off for now as I can make the minimum payments myself. But it is still on my mind (though unemployed right now and waiting for Universal Credit).
My question is that I have moved back in with my parents. Could this put their place under threat?
Sara (Debt Camel) says
No. Absolutely not. And it won’t affect their credit records either (assuming you don’t have a joint account with one of them!)
Your bank can’t give you debt advice. How many days a month are you in your overdraft? How much did you use it before you lost your job? Roughly how large re your debts?
Do you expect to get another job quickly? Do you have a car on finance?
peter says
I have a DMP with Step Change that has been in place since august 2021, with just over £50,000 left to pay. I have about £100,000 equity in my house that could be used to pay the DMP off in one lump sum. Is there any way that I could remortgage/release equity to do this, bearing in mind my current mortgage is fixed until 2029 with Santander and has hefty early release fees?
Sara (Debt Camel) says
When did your current mortgage fix start? How large is your current mortgage?
What sort of debts are in your DMP, could you list them?
How much are you paying to the DMP a month?
How many of the debts have been sold to debt collectors?
peter says
Current fix started Feb 2022 and currently has £4,000 early exit fee. Mortgage is £94,000 (including early exit fee) There are a 21 debts (personal loans and credit cards) in total between me and my wife. All but 4 of these have been sold to debt collectors and most now with Intrum, Link or Moorcroft. We are paying £1,000 per month
Sara (Debt Camel) says
Is the £1000 a month affordable?
Jon says
Hi Sara
I’m just starting with Stepchange
It starts the 1st March
Should all payments to creditors stop immediately
Thanks in advance
Jon.
Sara (Debt Camel) says
it;s generally a good idea to stop paying now, see https://debtcamel.co.uk/stop-debt-payments-before-dmp/
Ryan says
Hi Sara,
I’ve been considering entering a DMP. Today on MSE I’ve read it’s better to allow your accounts to default PRIOR to entering a DMP. Is this good advice?
As I reside in Scotland I’m unsure if the advice differs and I am wondering if the DMP will default within the first 6 months anyway.
Thanks
Sara (Debt Camel) says
Scotland/ England is irrelevant.
It’s not bad advice, but it can be pretty stressful – exactly the sort of stress that a DMP is supposed to remove. Most debts will default within 6 months anyway, and you can Complain about any that don’t.
Ben says
Hi Sara, I am on a Debt Management Plan with StepChange and find them amazing, lovely people. I am sadly in £22,000 worth of debt, and currently can only afford £208 per month to pay the plan, I’m disabled and in a bad way. I have a car on HP finance and have never missed a payment to them. My DMP is going to take around 10 years. Is this a bad thing? I do worry about my future prospects for renting and mortgages, am I right in thinking my credit score will be on it’s knees for 16 years? (10 years for the plan, 6 years to clear the score)? I have no assets so didn’t think an IVA was suitable. Thank you.
Sara (Debt Camel) says
How long has the DMP being running?
When does the car HP end?
Ben says
Hi Sara,
It will be a year in August.
The car finance has another 4 years to go.
Sara (Debt Camel) says
So when the car HP ends you will be able to pay more to the DMP and it should finish much faster.
How many of the debts in your DMP have been defaulted? Have any been sold to debt collectors?
Ben says
Hi Sara,
This is true. Two have defaulted. I’m hoping the rest will at some point!
The rest are ‘in arrears’ on my credit file
Sara (Debt Camel) says
are any of them 6 months in arrears?
Ben says
Nope, January and February of this year they were reported as in arrears!
Sara (Debt Camel) says
I suggest you wait a couple more months. Then if defaults haven’t been added, contact the lenders and say the credit reporting is inaccurate, you have now been in a DMP since August, and you would like a default added.
Jo says
Hello
I have been on a dmp for a good few years and managed to clear £19,000 I have about £14,000 to go. Most of my defaults have now gone off my credit file I just have two more to go which should be gone by April. As the defaults have now gone is it worth me trying to make a partial settlement on a couple of my accounts? As this would not impact my score now?
Sara (Debt Camel) says
Partial settlements do NOT impact your credit score and do not cause the debt to stay on your credit record for longer.
Jo says
So it would be worth just trying to request a partial settlement as it will have no impact? I will just be debt free quicker?
Sara (Debt Camel) says
yes, don’t ask for an offer – make one. See https://debtcamel.co.uk/debt-options/less-common/full-final/
Emily says
Hi,
I am after some advice really. I haven’t been well mentally and with the cost of living combined with a gambling addiction, I have found myself in debt. I am wondering what my best option would be? I would really struggle and basically leave myself with nothing at the end of each month if I paid the right payments.
I previously went on a DMP with stepchange back in 2019 and cleared my previous debt in in the end along with full and final sentiments. I currently have a loan and a credit card, which I can’t afford the repayments for. The loan is very recent, as I needed the funds due to a household emergency.
Total balances-
Zopa loan £1738.56 (with the interest pre-loaded)
Vanquis credit card £500
I also have £514.95 on a HSBC balance transfer til June 2025. Don’t know if you would include this or not?
Thanks
Sara (Debt Camel) says
I suggest you go back to StepChange for all three debts.
Are you getting help with your gambling problem?
John says
Hi,
I am currently around 12 months into a 10 year DMP with step change, owing £30000 & paying £270 a month.
I am being made redundant & should receive approx £24000.
the majority of the debts are now with collection agencies,
My plan is to make an offer of around 25% to clear the debt (around £7000)
Do you think this is likely to be accepted?
i have no job lined up so don’t want to wipe out what money i may need to live on for the forseeable future & am reluctant to offer more than this.
any advice appreciated
kind regards
John
Sara (Debt Camel) says
I can’t really guess.
Do you have any debts outside the DMP eg car on finance? Arrears on bills? Are you buying or renting?
Do you have a partner who is working?
John says
no other debts & i’m renting.
Yes my wife works,
she earns around £29000
Sara (Debt Camel) says
how long do you think it may take to get another job?
Apart from making an immediate settlement offer – and I have no idea how that is likely to be seen – your other options include just carrying on paying the DMP each month and also looking at affordability complaints (see https://debtcamel.co.uk/tag/refunds/)
The problem with making an offer now from only part of the redundancy money is that if it is turned down, then those creditors will potentially know you have a lot of money in the bank.
S says
Hi John
I was in your position around 1 year ago. I got 25k in redundancy and owed out 18k to companies like the PRA Group, Intrum etc. most of the were only giving me around 20%-30% off so i would very much doubt they will accept that amount. You can always try and i hope they do accept it.
The PRA group are one of the hardest companies to deal with when trying to get an offer.
S says
Hello,
I’ve just entered into a DMP with stepchange for over 18.5k. As far as i know, they have all accepted my terms of paying £305 per month. I’m away some if not all of my debts will be sold on to companies like the PRA group.
I’m aware that my credit file will not show defaults on these accounts but will they put a CCJ on? I have made payments up until last month before entering into the DMP which starts on September 1st. I have made a token payment to the creditors of £5 for the month of Aug
Sara (Debt Camel) says
Defaults probably will be added at some point.
It isn’t common for normal consumer creditors getting a DMP payment from StepChange to take you too court.
Look at making affordability complaints – see https://debtcamel.co.uk/tag/refunds/ which has separate article for different types of debt. Win any and your DMP will be speeded up. and it may help to clean up your credit record a bit.
K says
Hi Sara,
I wasn’t able to make payments towards 5 credit cards in 2018, subsequently ended in defaults and closed accounts. I haven’t taken credit out in the last 6 years and have been paying these creditors £1 each a month with step-change ever since (been a student for 4 years). I have noticed all accounts have now dropped off my credit score on all the major credit score companies. What do I do here? keep paying the £1 until I get a job then start paying bigger amounts? Stop paying the £1? and is there still a chance they can give me a CCJ? I want to be able to get a mortgage and credit in the future.
Sara (Debt Camel) says
when does your course end? How large are these debts at the moment?
K says
I graduate next May. I currently owe £14.5k.
Sara (Debt Camel) says
Ok so the debts will have dropped off your credit records when it was 6 years from the default date.
But you are still making payments each month to the debts, so they will never become “statute barred” – to old to be be taken to court for. So if you stop paying, you are very likely to be taken to court for a CCJ. the fact they arent on your credit record is irrelevant
So your choices are:
1) carry on paying £1 a month – the problem with this is at some point the debt collectors (I guess they have all been sold to debt collectors by now?) may ask you to pay more then you are earning. And still paying these debts will make it very hard to get a mortgage – the mortgage lender will know these are old defaulted debts as they will be able to see who you are paying from your bank records
2) increase the monthly payments when you are earning – it depends how large your income and expenses will be. For most people just starting on a career 14k of debt is a lot and will make it hard to save a deposit for a mortgage at the same time
3) make settlement offers to the debts – the debt collectors would probably accept low offers now, but where would you get the money from? Don’t borrow to make settlement offers – that is getting new, expensive debt in exchange for old debt at no interest and off your credit record.
4) ask the current debt collectors to produce the CCA agreement for the debts. See https://debtcamel.co.uk/ask-cca-agreement-for-debt/ for more about this. It isn’t guaranteed to work for any debt. If you try this it is best done now, as the debt collectors may ask you for your current income & expenditure to check you cant pay more then £1 a month.
5) carry on paying £1 a month for as long as possible but save up some money to make settlement offers with.
K says
Thank you so much for your thorough reply. I will think carefully about which route I choose to go down.
S says
Hello
I’m entering into a payment arrangement with step change. I’m starting to see the mussed payments on my credit file (as expected) I’m also expecting defaults.
But will any of the companies put CCJ’s on my file?
118118 are a bunch of you know what’s and I feel like put of all the companies (118118, Reevo, Oakbrook, Fluid, Zable, Elfin, credit spring) they will put one on. They all know I’m entering a DMP.
Defaults are bad but a CCJ is such a killer. I’ve not missed 2 payments with them all. Well 1 payment and this month I made a token payment of £5 until my DMP starts paying them £305 a month between them on September 1st
Sara (Debt Camel) says
CCJs for consumer credit lending is unusual. They are more common for guarantor loans, business debts and odd non commercial debts.
The best revenge is to get even… Look at affordability complaints against the lenders unless the credit was small originally.
SC says
Hi Sara I’ve recently applied for a DMP through Stepchange, on completion it states I will receive confirmation/set up within 42 days. I am due to pay my usual debts in the next 10 days including over £300 to my bank for a personal loan. Do I need to wait on confirmation from Stepchange that the DMP is in place before cancelling the D.D for these debts?
My worry is if I pay these then the payment plan is put in place I won’t have money for another money to make my DMP payment.
Also can my bank do anything to me if I cancel the D.D for the loan?
Does anyone ever get refused the DMP, I’m struggling every month but not currently missed any payments (because I use more finance to survive when I’ve used all my wages paying the debt!) thanks
Sara (Debt Camel) says
I suggest you cancel any payments to debts that will be included in your DMP now. See https://debtcamel.co.uk/stop-debt-payments-before-dmp/ which explains why.
This is also a good point to get a bank account with a bank you do not owe any money to, move your income over to that new account and move over any direct debts for household bills – but not for the debts going into your DMP.
Your bank will ask you why you have canceled the payment – tell them you cant afford it and are taking debt advice from stepChange/
DMPs do not have to be approved by your creditors. Sometimes a creditor will carru on adding interest to a credit card or catalogoe or overdraft – but this is unusual and is normally because they have made an error! Let me know if this happens to you because you can complain about it.
A DMP sounds like a good option for you – you have to stop the spiral of borrowing more.
Once the DMP is underway, have a look at making affordability complaints about the debts in the DMP – some lenders have lent you more than you could afford! winning any will really speed up the DMP. See https://debtcamel.co.uk/tag/refunds/ for details about when and how to make these complaints.
renata says
Hi Sara , I already have a DMP in place which is managed by Payment plan . Would you Still recommend using your refund templates to request refunds for irresponsible lending? I think some of my creditors should have not approved my loans and credit card applications as I was already struggling financially , using my overdraft on regular basis , and kept applying for other loans/ credit cards to pay off other debt , I owe over 22k , i Took my biggest loan in 2017 , and struggled massively to pay it back , hence why as a last resort I asked Payplan to step in and help me in 2023. If I did use your templates , would that affect my DMP at all ? I see many people which find your templates incredibly helpful and they actually do manage to get some money back , which could help me pay off some debt if i was successful with it in any way but I am very new to all this , and very worried , of course the debt is affecting my mental well being on daily basis too . Any help would be much appreciated thank you .
Sara (Debt Camel) says
these complaints are a very good way to speed up a DMP – if you win the interest is removed. There is no reason to delay.
They will not affect the DMP at all.
I suggest you read up about loan, credit card and overdraft complaints: https://debtcamel.co.uk/tag/refunds/
nina louise says
Hi Sara,
I am currently helping a family member with some debt issues they are facing. Lets call this person L.
L is in around £17,000 worth of debt with credit cards and loans. not including a HP car finance still owing around £4,300.
L has no savings and no valuable assets.
L is facing some financial hardship and although is maintaining monthly repayments they cannot continue to do so. and needs to consolidate all loans, card and phone contracts totalling to the above figure of around £17,000
We initially were going to apply for an IVA but now its looking as the worst option.
what would be the best option possible for L?
i have been looking into a DRO but not quite sure how this works? do you make a monthly repayment?
with any debt management plan is there a way of keeping certain creditors e.g. L has an account with PayPal and uses regularly and wouldn’t want to loose this account is there a way of keeping this and obviously the car?
ideally L would like to consolidate debt of around £17,00 keep the car hp which is £109 PCM and there paypal account open.
what do you recommend
thanks
Nina Louise.
Sara (Debt Camel) says
With no assets, an IVA isn’t likely to be a good option for them.
How much is the car worth now?
nina louise says
Hi Sara, Retail value is around £2800-£3000.
if an iva isn’t a good option what would you recommend? said persons cant financially afford to pay there bills and are living month to month constantly using credit cards and overdrafts to get by.
thanks
chanel
Sara (Debt Camel) says
Ok with a car value under 4K a DRO may be possible.
In a DRO you dont make any monthly payments.
Paypal is very expensive – she needs to stop using it in any option. When the other debts are gone/being cleared with an affordable amount she should be able to put aside money monthly for clothes and gifts so she no longer needs that sort of credit.
I suggest she talks to StepChange and see if they recommend a DMP or a DRO. She should complete their income & expenditure form and think about what she needs to spend long term, not how little she can get away with for a month or two. So include amounts for Xmas, dentist, haircuts, clothes , say Yes to savings etc https://www.stepchange.org/
Nina louise says
Hi Sara,
Thanks for your response.
I’ll get hold of step change to.
So just to confirm with a dro, you add the bills that you want to consolidate but you pay no monthly fee and then it gets wiped off after a year? This seems almost onto be true?
Thanks
Chanel
Sara (Debt Camel) says
yes. “Consolidate” is a misnomer here – a DRO is a form of insolvency that clears your debts like bankruptcy and an IVA.
Nina louise says
Ok great, sorry I just want to make sure I’m correct here, so with a DRO you make no monthly payments and after a year all debt is wiped and the dro remains on the credit file for 6 years?
Sara (Debt Camel) says
yes that is right
Graham says
Hi Everyone
I have a query about my DMP.
I have around £6k left to pay on this and I am currently paying £60 a month to it.
I have an investment maturing in around 20 months time, which should raise around £3k
Question is, when that matures, should i use the £3k to make a 50% F&F offer on the balance (£4800) an pocket the £600?
Or, should I make further monthly payment of £80 to my DMP and then clear the balance with my maturing investment?
How would each option reflect upon my credit file ?
TIA
G
Sara (Debt Camel) says
how long ago did the DMP start? have the debts in it been defaulted? sold to debt collectors?
Graham says
Hi
DMP started 10yrs ago, I only have the one creditor left on it.
It’s due to Heliodor, former Northern Rock unsecured loan.
Sara (Debt Camel) says
and this shows as defaulted? or a payment arrangement?
Graham says
Payment arrangement
Tim says
Hi Sarah,
I have recently won a number of affordability complaints for large loans taken out to fund a gambling addiction. The loans still have balances so I have had the intrest and charges removed. My question is should I still receive notice of arrears letters? My understanding was that these would stop as the loans would be removed from the credit reference agencies. I am in payment plans for all the loans. Thanks
Sara (Debt Camel) says
Reporting to credit reference agencies has nothing to do with being sent notice of arrears letters that are required under the Consumer Credit Act.
Roxanne Dilliway says
If I take out a dmp will I end up with debt collectors on my door step? I’m worried about this
Sara (Debt Camel) says
debt collectors only tend to send round someone when you don’t talk to them. It’s really rare in a DMP as you are communication and they know StepChange will be making sure they are sent a fair amount each month.
DeliciousMess says
My question is relating to information on credit reports.
Of all the debts barring one they are marked as Default (ending 2026), however one is marked as delinquent.
Can you please advise if a Delinquency is the same as a Default which drops off after 6yrs after being marked delinquent OR if it’s 6yrs after final payment?
I’m currently in a DMP, but I am hoping to be returning to work next year (had ill health) and whilst increasing payments I will still be a couple of years after current default dates on clearing the balances.
Sara (Debt Camel) says
No a delinquent debt doesn’t have a default date, so that debt will stay on your report for 6 years after it is settled. You can ask for a default date to be backdate to near the start of your DMP, see https://debtcamel.co.uk/debt-default-date/
Have any of your debts been sold to debt advisers? You could consider asking them to produce the CCA agreement for the account, see https://debtcamel.co.uk/ask-cca-agreement-for-debt/
DeliciousMess says
Hi
Yep debt been sold to Link and Lantern.
However with the Link one I have a ombudsman claim going through with Vanquis & Vanquis supplied the CCA.
I’ll have to send one off to Lantern – thanks..
Sara (Debt Camel) says
you can also try an affordability complaint against Vanquis (not Link) see https://debtcamel.co.uk/refunds-catalogue-credit-card/
DeliciousMess says
Yep that’s what I’ve gone after then for and their form of PPI that they added to the card each month up until 2022.
Bob Mery says
Hi Sara,
I am about to enter a DMP but am not sure whether a loan against my property would be a better option as I can get a £15,000 loan from pepper money for £240 a month which would be a similar amount for my DMP, however I have a shared ownership newbuild which has £24,000 in and own 30% of it. My current debts are around £14,000 (Credit cards payday loan’s) but unsure what’s best option.
Thanks,
Bob
Sara (Debt Camel) says
Who is your mortgage lender? When does your current fix end and what are you paying at the moment?
You will normally need consent from the Housing Association to get a secured loan. In general I think they should be avoided – why pay interest and put your house at risk when a DMP is an alternative?
Do you have car finance?
Bob Mery says
Leeds building society, current fix is 2 years and has around 1 year and 2 months left, I’m paying £400 a month mortgage and £620 rent, Will I still be able to re mortgage with a DMP? as my mortgage advisor will find out about my DMP when trying to look for cheaper rates? no I don’t have car finance.
Sara (Debt Camel) says
OK Leeds BS has signed the mortgage charter, so you shouldn’t have a problem getting a new fix from them whatever your credit record is like, provided you don’t have mortgage arrears.
I can’t think of a good reason to take a risky secured loan instead of a DMP. A DMP is flexible – if your rent and council tax go up in April, your DMP payment can always be reduced… secured loan payments can’t be changed and your house is at risk.
And if you can win any affordability complaints (see https://debtcamel.co.uk/tag/refunds/ for details and templates to use) then your DMP may end much sooner.
Who are you talking to about a DMP?
Bob Merry says
Hi Sara,
No the mortgage has always been paid in full along with the rent, I just worry that my mortgage advisor will ask me a lot of questions when they help me re fix next year. I am talking to step change as that appears to be the best provider of a DMP. I can only receive refunds on interest though and currently the interest on all debts and the debts in general are pretty high.
PayPal – £3300
Salary Finance £4000
Aqua Card – £1500
Jaja Card – £1500
Payday loans 4 in total around £2500
Sara (Debt Camel) says
if you are concerned, why not talk to the mortgage adviser now? They are normally happy to explain what the procedure will be next year.
Winning any affordability complaints may not clear a debt, but if you are paying £250 to a DMP, getting a refund of £500 will get the DMP to finish 2 months earlier.
Also, have you asked the Housing Association about a secured loan, because you would need their approval to get one.
Alison says
Hi there, I had set up a DMP with StepChange with first payment on 1st Feb. I’ve read that it’s better to let the debts default first in terms of credit rating file (6 year period). Is this the right thing to do…
Sara (Debt Camel) says
how long do you think it will take to clear the debts?
Alison says
A long time…10+ years
Sara (Debt Camel) says
So there isn’t a clear cut answer to this.
– If you wait and don’t pay until they default and don’t talk to the lenders, then it can take months, during which time more interest is being added.
– if you pay up until a StepChange DMP then interest gets stopped quickly but some lenders may be slow to add a default. Which will mean your credit record isn’t clean as soon as it could be, but this is hard to tell as it’s erratic when lenders add a default even if you just stop paying
– my feeling is that more lenders will add a default quickly than used to, and others will add a default if you complain after 6 months that they haven’t
MG says
Hi,
I’m currently on a DMP with Stepchange, but I’m planning to leave the country. I wouldn’t want to just abandon Stepchange/my creditors as I don’t want to be chased abroad but I also don’t want to keep paying from abroad as I will be earning significantly less. What are my options?
Sara (Debt Camel) says
Do you ever intend to return? How large are the debts in your DMP now and how much are you payng a month into the DMP now?
MG says
Maybe, that is undecided. The total amount is 34k over credit cards, loans and overdrafts. I’m paying £689 per month.
Sara (Debt Camel) says
Being chased abroad is pretty unlikely, but do you care about what has happened to the debts if you return?
how long has the DMP been running? Are any of your debts very large? Do you think you might be able to pay a lot less abroad, or is it likely to be nothing?
MG says
I do care as I assume the creditors would want their money back if I showed up a few years later.
Since December. I think the largest is 11k. I’d definitely be able to pay a lot less abroad or possibly nothing compared to what I’m paying now.
Sara (Debt Camel) says
I am assuming you don’t have any assets such as a house in this country.
Your options include:
1) leave the country and forget about the debts as you are unlikely to be chased abroad
2) tell StepChange you are going abroad and you need to stop payments until you are settled with a job and housing and then look at what you can repay
3) similar to (2) but if the amount is nothing or very little, at that point look at bankruptcy. You can go bankrupt from abroad up to 3 years after you have left, see https://debtcamel.co.uk/bankrupt-england-from-abroad/
MG says
I have no assets. Thank you for all your answers. Isn’t DRO an option? As technically I would have no income in the UK and I could start it before I leave.
Sara (Debt Camel) says
A DRO may be an option but it isn’t at the moment because of your income. You can talk to a DRO adviser now, but its very unlikely they will be prepared to set one up based on your expectations that you will have little spare income abroad. You can talk to StepChange now about the fact you are leaving the UK and your options aborad
Charlotte says
Hi Sara.
I’ve been in a debt management plan since 2022, always made payments on time. On my credit file, one of the lenders (lenable) is reporting the payments as missed payments. I just wanted to know what the best way to resolve this would be. Am I able to ask them to put it as a default instead? If so when from. As I’m worried that all of the other debts will drop off six years after defaulting, but these missed payments will continue to be on my file for much longer.
Thank you
Sara (Debt Camel) says
You could ask them to add a default date, see https://debtcamel.co.uk/debt-default-date/
An alternative approach would be to make an affordability complaint about the debt, see https://debtcamel.co.uk/refunds-large-high-cost-loans/. If you win that, interest is removed, so it will speed up your DMp. And any negative marks shopuld be removed from your credit record.
You could also look at affordability complaints about other loans, credit cards and overdrafts in your DMP?
Jane says
Hello Sara,
We had a DMP in 2008 but ended it in 2017 when we requested CCAs for existing debts. Most creditors couldn’t supply them and we haven’t heard from them since.
I’ve just had a letter out of the blue from Link saying if they don’t hear from me within 7 days, Resolvecall will be coming to our address.
I have written them a complaint letter before about this type of correspondence re a different account back in 2020 quoting the regulator’s rule CONC 13.1.6 (4) but this is now 7 years on from when they admitted the debt is unenforceable. Are they going to be able to send letters like this from time to time forever? Should I just resend the complaints letter again? Thank you
Sara (Debt Camel) says
Are you saying they said this debt (not some other one) was unenforceable 7 years ago? and you haven’t made any payments since?
Jane says
I can’t find the actual letter saying it was unenforceable from them but I have made a note that they did respond to say it was unenforceable in feb 2020. I’ve only had statements through until now, no chase for payments when they say they’ve been trying to contact me to discuss repayment but they haven’t, and that Resolvecall will be round within 7 days unless I contact them
Sara (Debt Camel) says
So you haven’t made a payment to this debt since 2017? In that case I suggest you contact National Debtline on 0808 808 4000 who have a template letter you can send Link saying the debt is statute barred.
This is better that arguing about enforceability, as with statute barring (a) it can’t be undone by a document turning up and (b) after yiou have said the debt is statute barred, they cant continue to suggest you pay.
Jane says
Sorry having checked, the 6 years is up with no payment having been made in October this year. I understand that I can respond to them to stop Resolvecall coming to visit us but I need to word it in a way that doesn’t acknowledge the debt as ours. Is there a template letter that I could send them? Thank you for your help.
Sara (Debt Camel) says
Then it may be simpler to just ignore resolvecall. Don’t answer the door to them. Or just tell them you do not want to speak to them about this alleged debt, close the door. There is no need to invite them in or be apologetic, just tell them to go away.
Jane says
Thank you for all your advice. It makes me incredibly anxious at the thought of Resolvecall coming to our door in case we’re not here and our children are – I wondered is there not a template letter which doesn’t compromise the status of the current 6 years statute barred deadline, reiterating the request for a CCA as they have acknowledged in 2020 they can’t provide it. If I could find a non incriminating template, I could use it on any other creditors who try this in the next 6 months before everything becomes statute barred.
Sara (Debt Camel) says
You could ask National Debtline on 0808 808 4000 what they suggest.
Resolvecall are not bailiffs, if there are only children in the house they won’t come in.
Kim says
Hi, I have been in contact with two companies regarding my credit cards. One MBNA, and Santander. MBNA stopped the interest for a few months, and this month is the first month the interest is being added back in. It’s nearly £200 in interest. They say they can’t do anymore and advised speaking to Stepchange, which I have.
I filled the forms in, and I can be debt free in 2 years.
I know my credit will be bad, and it isn’t great now so to be honest it doesn’t bother me too much.
Just worried about a few things.
1. I have a joint savings account with my husband, it’s with his bank. It’s still in my maiden name on the savings account, and most of my debts are too in my maiden name. Will his credit score be affected if I go through with the DMP. Should I get taken off the joint savings account?
2. Lots of people have said to default payments first, then set up a DMP. I suffer quite bad with anxiety and OCD, and the thought of this makes me feel sick and makes my anxiety worse.
3. As I have already notified the credit card companies about my situation, it’s been suggested that I shouldn’t have done this, and might make it difficult for me with regards to defaulting first.
Sorry for a long post.
Sara (Debt Camel) says
A joint savings account isn’t a link between you. Only a joint bank account or a joint loan or mortgage is. How much money is in the savings account though?
A 2 year DMP is very short – what monthly payments would you be paying to StepChange? what is the sum of your current minimum payments to those two cards?
Have the cards increased your credit limit while you were only paying the minimum to them?
Kim says
Oh ok, I was under the impression it would link us. Only about £50/£100 in the joint savings account.
The monthly payments with step change would be £549.29, for 2 years 4 months.
This debt will include my £500 o/d, catalogue just over £1,600, next £140, Santander credit card £3281.00, MBNA £8250, Lloyds £648, creation £554 & £149.
The interest with MBNA this month is £193, minimum payment is £275.52.
Santander £69.47 min payment & interest is £49.87
Sara (Debt Camel) says
what are the total of all the minimum payments to your debts?
It looks as though you may be paying StepChange more than the minimums – this is pretty unusual. the problem here is that some of your creditors may refuse to freeze interest.
Kim says
Lloyds min £18.15 this month
Creation 1. £25.99
Creation 2. Will be £31.85 when the BNPL ends in. August.
Next £8
MBNA £275.52
Santander £69.47
Overdraft approx £9
Catalogue £43.83 this month but have just had bnpl purchases added which weren’t paid in full going to be added.
Total £481.81
I did have a look at the budget again with step change and they did flag up that my budget for food might have been a bit low.
I just really need to get debt free. The interest on the bigger debts is making it hard to get the balance down.
Looking at my statement for Santander, next months estimated interest is £49, this month was around £35.
Sara (Debt Camel) says
So my concern here is lenders do not HAVE to freeze interest in a DMP. They almost always do, but one of the rare exceptions is when they are being paid more through the DMP than their normal minimum payments. I guess their reasoning is that this suggests you aren’t in difficulty and so they can carry on charging interest.
In this situation you may not get any defaults.
I think if StepChange are flagging that your groceries are too low, that should be increased. Do you have amounts in there for clothes, haircuts, gifts, xmas, dentist, car costs (if you have one), some entertainment, replacing some goods in the house, etc? I understand you want your debts cleared but a realistic budget is essential, especially for people with mental health problems.
Michael B says
Hi Sara,
I have a question about a loan with a credit union. I’ve read that they can be more challenging to come to an arrangement with than standard creditors. Do you know if missed payments with a credit union will also lead to a default or do they not because they are regulated in a different way? I’m concerned about them going to court if I can’t reach an agreement with them. I’m planning on going through a DMP with Step Change within the next few weeks but this loan is what’s worrying me.
Sara (Debt Camel) says
Sometimes Credit Unions can be difficult. But it often depends on how much they are being offered each month, will the payment in a DMP be reasonable?
You could also consider an affordability complaint against the credit Union if you feel their loan has caused you a lot of problems, see https://debtcamel.co.uk/refunds-large-high-cost-loans/
Michael says
I’ve asked them if I can make monthly repayments such are 30% lower than the full repayments. In waiting for their reply. I am on the process of making affordability complaints as well.
Do credit unions update credit reports with defaults in the same way other loan companies do? I’m worried about having an arrangement to pay marker for years on my file
Sara (Debt Camel) says
I can’t really generalise about credit unions tend to report this, I haven’t seen enough details.
H says
Hi Sara.
We’ve just heard from Novuna today that they are upholding our affordability complaint against a loan. They’ve now frozen interest on the loan reducing the repayable amount by nearly 14k, refunded interest already applied, reducing the repayment period by nearly 3 years! This is a massive win for us. While not out of the woods, it definitely feels like there is light – I used your affordability template, so can’t thank you enough!