A Debt Management Plan (DMP) is an informal repayment arrangement where you make a single reduced monthly payment to a debt management provider, who then distributes the money to your creditors. Unlike an IVA, a DMP is not legally binding — either you or your creditors can withdraw from it at any time.
DMPs do not appear as a specific marker on your credit file, but the reduced payments are likely to result in missed payment markers and possible defaults being recorded against your individual accounts. This means your credit file will show evidence of the financial difficulty even though the DMP itself is not listed.
Getting a mortgage while on an active DMP is challenging because lenders see ongoing reduced payments as a sign of financial stress. Once a DMP has been completed and enough time has passed for the associated adverse markers to age or drop off your credit file, your options improve.
Free DMP services are available through charities such as StepChange and PayPlan. Commercial providers also offer DMPs, but they charge fees that reduce the amount going towards your debts.
Rachel has £18,000 of credit card and personal loan debt. She cannot afford the combined minimum payments of £550 per month, so she arranges a DMP through StepChange, reducing her monthly outgoing to £200. After four years on the plan, she has cleared the debt. The reduced payment markers from the DMP period remain on her credit file but are now over three years old, and a specialist broker finds her a mortgage deal at 5.5% with a 15% deposit.
Key Points
- A DMP is an informal, non-legally-binding agreement — either side can withdraw
- The DMP itself does not appear on your credit file, but reduced payments and defaults will
- Free DMP services are available from charities like StepChange and PayPlan
- Getting a mortgage during an active DMP is difficult but not impossible with specialist lenders
- Once the DMP is completed and adverse markers age, mortgage options improve