07:17 05 November 2013
Debts can be very embarrassing especially when you have loads of them weighing on your shoulders. Some people have reverted to using Debt Management Plans (DMP) to solving their debt issues.
What is DMP in first place? Any informal agreement made between a debtor and a creditor in a bid to settle up debt is called a Debt Management Plan.
Below are five frequently asked questions on DMPs:
How long does a DMP last?
Your DMP length is highly dependent on your individual situation and the amount of debt you have to settle. If your creditor should freeze your interest and charges, the duration of your DMP may reduce.
What is the set up cost?
Setting up a DMP is totally free but if you are going to be using a debt management company, you may be charged a certain amount of money which they refer to as start-up fee or monthly management fee. It could be in the range of 15% – 17% of your monthly payment.
Can DMPs be terminated at will?
Since Debt Management Plans are informal arrangements, they can be terminated whenever you wish but you are required to notify the company so that they’ll in turn notify your creditors.
Will my credit rating be affected during the DMP duration?
A DMP doesn’t appear on your credit file so you are safe; but if you still experience financial difficulties during the duration and miss repayments, it is possible that your credit rating will be affected.
What form of support can I get during my DMP?
The support you get is determined by the firm you choose. There are many firms out there who can do a good job. Aside from doing their professional job, they’ll also encourage you so you don’t feel too much depression as a result of your debt problems.
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