What is Debt Payment Plan (DMP)? (Manage Your Debt)

Can a debt collector refuse a payment plan uk? If you are struggling with your debts and credit card loans along with the high-interest rate, this is the time when you need to get out of it. The only way that you can make this possible is to set up a proper debt payment plan. 

The debt payment plan will then help you to make your payment faster so that you can easily get out of it. Even with the help of a debt payment plan, you can pay your other bills as well. It will always be a good idea if you choose one debt at a time so that the process of the debt payment will be faster and you will get more benefit out of it. Once you make the debt payment plan, you will see how quickly you can be free from your debt.

Learn About the Best Ways to Set Up the Debt Payment Plan:

If you want to make your payment on time, then the debt payment plan will help you to do so exactly the way you want. Follow these below-mentioned steps and make a better debt payment plan.

1. Write Down All Your Debts in a Paper

Once you have decided to get out of your debt the first thing that you have to do is to make a list of all your debts in a paper. Then, write down about the minimum payments as well as the interest rate that you need to pay. Make the total of your debts and check how much amount you have to pay for each month. In case you have credit loans or the students or mortgage, ensure you include all of that. In case, you have to pay any amount to your family members or friends, then do not forget to add to the list.

2. Cut Down Some Debts

Sometimes, we rent furniture and electronic devices for a particular purpose. So, if you want to get out of your debt faster, then return those items as soon as possible. Thus, you can be free from the additional debts that you need to pay for every month. In case you have any old debt that you are unable to pay, then your creditors might release you from that debt. Better you take advice from a lawyer and then go for any new debts.

3. Rank Your Debts

The next step is to rank your debts, it means you can arrange your debts in order that you have to pay off. It is always recommended for you to pay off the smallest amount fast then the largest one.

On the other hand, a few recommended starting with the highest one can help you to save a lot of money. You can even choose any of the processes that will be suitable for you but make sure once you make the list, you stick to it.

4. Arrange Some Extra Money to Pay Off Your Debts

There are several methods that you can follow to increase your income. You can also check out the discounts or government benefits as well. But make sure you check whether you are eligible for those benefits or not. Get detailed information about the following list of discounts or government benefits.

  • TANF or Temporary Assistance for Needy Families
  • LIHEAP OR Federal Low Income Home Energy Assistance Program
  • Federal tax credits
  • Food Stamps or SNAP
  • Homestead Exemption
  • Illinois Senior Citizens Homestead
  • Free or reduced-price health insurance
  • Lifeline telephone assistance program 
  • WIC or Woman, Infants and Children nutrition program
  • Unemployment Benefits 

In case, you are unable to meet the criteria of the government benefit, you can go for the other options such as you can find part-time jobs or do extra overtime to increase your income or sell out the items to get extra money. Apart from that, if you have got any gifts or bonuses, then you can use those amounts to pay off your debt more quickly. You also might use your tax returns or make a better budget plan to get out of your debt as soon as possible.

5. Cut Down Your Expenses

Good budget planning can always be a good option in case you want to save your money. For that, you need to cut down your expenses. In case you love going out to restaurants to explore the food items or if you love shopping or purchasing clothes or groceries more than you need then stop all of that. Even if you live in an apartment and pay a high monthly rent amount each month then find out a place that is available in a low rent amount.  

6. Pay off Your Debt One by One

If you want to become successful with your debt payment plan, then focus on one debt at a time. Give your best effort to pay off the first debt that you have enlisted and pay the minimum amount for other payments. 

For example, if you choose one debt at a time, you will be able to pay off your debt faster. In case more money will go directly to your main balance, then pay a less interest rate. On the other hand, if you focus on several debts at one time, then you have to pay more interest rates.

7. Pay off the Next Debt from Your List

After successfully paying off your first debt, now you can move onto the next debt. Here, you have to follow the same procedure, invest more amount into your second debt while paying the minimum for the others. Follow this method to all of your debts until you complete to pay off all of your debts. Though sometimes you might feel it is a never-ending process that is never going to end but sooner you will realize the benefit and will feel wonder at how faster you can pay off all your debts one by one.

But the minimum payment method might not be suitable for everyone. While you pay the minimum amount, you have to pay 2-5% of the total amount. Due to this, it might add more interest costs to you and even takes a longer time as well. So if you think this method is not ideal for you, better you pay more amount to pay off the bill faster. So, if you start paying a larger amount at the beginning, you will pay a lesser total amount later. Even no additional interest will be added to you.

8. Increase Your Savings

After paying off all of your debts now it’s time to make a savings account. It will then help you not to take any debt in the future. You always should have an emergency fund so that you can use that whenever you would require it. Once you pay off one debt, save that extra money. It is important how you use that extra money so that it will help you to pay off your debt in time.

Additional Tips

Check the details of the bank policies as well as credit card policies before taking any loans or debt. So, if you would have a clear idea about the debt policies and charging process, you can make a better debt payment plan or use different strategies so that you can make pay off your monthly payment on time.

Making an emergency fund can help you to pay off your debt faster. Hence, you do not need to take credit card loans and pay off the debt with the help of your emergency fund.  Sooner you create an emergency fund better result you would get. 

Debt Consolidation: One of the Best Debt Payment Plan

If you want to make a good debt payment plan, then debt consolidation can be a good option for you. But before that, you must know what debt consolidation is and how it should work.

Debt consolidation is usually a loan that will help you to pay off your debt, especially all your unsecured debts. Several loans can be included in one single loan and make this loan a larger debt. Even all the payoff terms and conditions of this loan are more beneficial and helpful to you. These benefits that you can get from this loan are mentioned down below-

It allows you to pay –

  • lower interest rate
  • Lower Monthly Payment 
  • For Student debt loan
  • Credit card loan and others

Key Factor of the Debt Consolidation Loan:

Debt consolidation can be considered as the act of taking a loan that will help you to pay off your debt easily.

Through this loan, you can easily transfer your original loan into another type of loan or lender without removing the original one.

Two debt consolidation loans are available-secured debt consolidation loan and unsecured consolidation loan.

For getting the lower interest credit cards, HELOCs or some special programs such as student loans, the debt consolidation loan is applicable.

What is the Procedure of the Debt Consolidation Loan?

If you have taken up several debts and do not know how to get rid of those loans, therefore you can apply for the debt consolidation loan. It will then consolidate all your debts into one single liability so that you can pay off your debts easily. This will be a new loan and you have to pay each month until the full amount is paid off.

It can be a good option for those who maintain a good relationship with their creditors as well as have a good payment history. You can either take help from your bank or credit union or ask your credit card company to apply for this loan.

Not only the bank but other debt consolidation service companies are there who will help you to take a debt consolidation loan. Even your creditors will allow you to take this loan if you have a good credit score.

But there are some other criterias that you need to meet to get this loan. In case, you are not eligible for this loan, better you go for the debt settlement option rather than taking the debt consolidation loan.

Pros and Cons of Debt Consolidation Loan

Debt consolidation can be an ideal one if you have several loans along with the high-interest rates or monthly payments.

  • Instead of making several payments, it will allow you to pay a single monthly payment or consolidate debt into one payment.
  • Your creditors no longer can send you letters or force you for the payment.
  • Make the interest payment low and help you to maintain a good credit score.
  • In case you have taken up a secured consolidation loan instead of any of your assets, you will get the benefit of the tax deduction.

In spite of all these benefits, there are many disadvantages to the debt consolidation loan.

  • You might have to pay for a longer period of time.
  • Your credit score might be hampered due to the longer-standing debts.
  • Increase the debt-to-credit utilization ratio.

Can a Debt collector Refuse a Payment Plan in the UK?

This is a question that might come into your mind if you are dealing with your debts and want to get rid of it. The answer to this question is Yes. Several reasons are there that your creditor might refuse your payment plan.

As per law, a collector might not accept your payment plans nor they are allowed to deal with your payment schedules. Their main job is to collect the payments from you as soon as possible. They usually avoid such situations from where they have to collect late payments. As per the scheduled time, your creditor will collect the payment from you. Within seven years from your first payment date, pay off the full amount. In case, you are not able to pay the creditor can push or force you to pay the full amount. This is one of the main reasons that if you want to make any payment plan during this time and ask permission from your creditors, then you can refuse your payment plan. To avoid such a situation, better you make a better arrangement before.