Debt Management Plan Pros and Cons

Are you thinking about using a Debt Management Plan (DMP) to handle your debts? You’ve come to the right place. Each month, more than 170,000 people visit our website to discover debt solutions.

In this simple guide, we’ll explain:

  •  What a Debt Management Plan (DMP) is
  •  The good points and bad points of a DMP
  •  How a DMP could help you reduce some debt
  •  Other choices if a DMP is not the best fit for you
  •  Stories of people who have used a DMP

Choosing a DMP can feel hard, and it’s common to feel unsure about seeking help. In fact, Citizens Advice revealed that 60% of adults facing financial difficulties hesitate to seek assistance.1

But don’t worry; you’re not alone. We are here to help you understand your choices and make an informed decision.

What are the Pros and Cons of a Debt Management Plan (DMP)? 

Weighing out the pros and cons of a certain debt solution can help you understand whether it would suit you. Ive compiled the pros and cons of a DMP so you can decide for yourself. 


  • You wont have to deal with your creditors anymore. Once a DMP is accepted and implemented, your DMP provider deals with creditors on your behalf. 
  • You might be able to freeze interest and charges on your debt. Interest rates are very high on unsecured debts, and if you can get them frozen, you could reduce the overall amount youll be paying back by a lot. Please note, however, that creditors are not obligated to freeze interest and charges if they enter into a DMP
  • Opting for any type of debt solution has a negative effect on your credit score. When you opt for a DMP, your reduced payments will appear on your credit file. However, if you keep making your reduced payments on time and in full, you will find that your credit score will eventually start to increase.
  • If you only have unsecured debts that can all be covered by a DMP, then its something you should consider. This is because if your DMP is accepted, youll only have to make a monthly payment towards your DMP, which will account for all of your creditors. 
  • Your monthly payments are reduced as part of your DMP. Please note that your DMP provider will ensure that you only pay what you can afford as part of your monthly payments. This makes debt management plans extremely manageable and flexible. 
  • A debt management plan is an informal solution. This means that its not legally binding and is not a solution that leads to formal insolvency. Avoiding formal insolvency in this way can help you because your name wont show up in any public insolvency register.

I’ve summarized the advantages of a DMP in a table for easier reference:


  • While a DMP not being legally binding can be an advantage, its also a disadvantage. This is because the agreement does not legally bind your creditors. While its true that youll be contacted a lot less by your creditors once your DMP is in place, you can still expect them to call you from time to time as they can legally do so.
  • One great risk of DMPs is that your creditors could reject your initial payment offer. In formal solutions such as IVAs, if most creditors agree to the proposal, all creditors are bound by it. However, for a DMP you may find that some creditors agree to it, whereas others might not. In this case, you must deal with the creditors that havent agreed to it separately from your DMP.
  • While a DMP eventually increases your credit score, its initial effect is lowering it. This is because the payments you make towards your debt as part of your DMP are reduced payments.
  • The duration for a debt management plan is typically much longer than that of other formal debt solutions such as IVAs and Trust Deeds. This is mainly because of the fact that you typically pay off the entirety of the money you owe as part of a DMP.
  • DMPs are typically a lot more expensive than other debt solutions. This is because you are usually expected to pay off the entirety of your debt, unlike other formal debt solutions. Also, theres a chance that your creditors may refuse to freeze interest and charges. The interest rates for unsecured debts are typically quite high, and you may pay much more than what you initially borrowed.

Debt Management Plans, Interest Rates and Persistent Debt

I wanted to expand upon the last disadvantage because I feel its important to explain.

Many Brits get stuck in persistent debt due to their DMP without even realising it, which is why its important that you be aware of it. 

You can become stuck in persistent debt if your creditors refuse to stop charging interest on your debts as part of your DMP

Since youll be making reduced payments towards your debts, there is a chance that your debt might be increasing at a faster rate than youre paying it back.

If this continued without any amendment, you would pay off these debts indefinitely. 

I highly advise that if your creditor(s) refuse to stop charging interest on your debts, you consult with your DMP provider. 

Look at your income, expenditure and disposable income to find out how much you can afford to pay in monthly payments each month. 

After this, you can determine whether the payments will be enough to keep you out of persistent debt. 

Options when A DMP is not suitable

A Debt Management Plan is not required to be accepted by creditors.

If your DMP is rejected, you should immediately consider other debt-relief options. You’ll need to consider other alternatives to a DMP and other debt solutions if your creditors reject your DMP.

Following other debt-relief options, such as bankruptcy or IVAs, and debt management plans (DMPs), may be advised by professionals.

Because these are necessary living expenses that could have an impact on your daily life, it is crucial that you have plans in place that can take care of your priority debts first (such as rent arrears, mortgages, and utility bills).


  1. StepChange – Credit safety net report

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