How long will it take to pay off your DMP
Your Debt management plan will be paid off when all your debts are paid. Working out how long this will take is relatively simple. However the time could increase or reduce depending on your circumstances.
Included in this article:
- How to calculate how long it will take to pay off your DMP
- What could increase the length of your plan?
- Options available to reduce the length of your DMP
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How to calculate how long it will take to pay off your DMP
To calculate how long it will take to pay off your debt management plan, you divide the total amount of debt included by the amount you will pay in each month.
So, if the total amount of debt included is £15,000 and your monthly payment is £150, it should take 100 months, or just over 8 years to pay it off
£15,000 divided by £150 = 100 months. 100 divided by 12 = 8.3 years
This calculation will only give you an estimation of how long it will take to pay off your Plan. The time could increase or decrease depending on your circumstances and the actions of your creditors.
If you are paying a commercial debt management company to manage your Plan, they will keep a percentage of what you pay in each month. Make sure you take this into account when completing the above calculation.
What could increase the length of your Plan?
You need to understand that you can only ever estimate how long it will take to pay off your debt management plan. There are different reasons for this.
Firstly your circumstances might change. If things get worse you might have to reduce you payments. This would increase the time it takes. Equally you might be able to increase your payments thus reducing the overall length of the Plan.
Another important factor to consider is that a DMP is not legally binding on your creditors. This means they are not legally obliged to stop adding interest and charges. If even one continues to do so, the amount of debt you have to repay will go up and to time it takes to pay off your plan will increase.
Generally speaking, if use a reputable debt management company, there is every chance that your creditors will agree to freeze interest. However the fact remains, they don’t have to.
Options available to reduce the length of your DMP
After you calculate the length of your debt management plan, you may be concerned at the length of time it will take to pay off. However it is possible to reduce this.
The most obvious way is to increase the amount you are paying each month. Your debt will be paid faster and the plan will end sooner. This might be possible if you get a pay rise or your living expenses fall.
The other way option is to settle early one or more of the debts included in your plan.
At any time during your Plan you can offer a cash lump sum to any of your creditors in return for them writing off the remainder of their debt. You do not have to offer lump sums to each of your creditors at the same time. If you only have sufficient cash to make a deal with one of them you can do so.
If you can’t increase your payment or settle any of your debts early, you might be able to become debt free sooner by switching to a different debt solution.
Talk to us if you want to discuss whether to stay in your DMP or change to a different solution such as an IVA or bankruptcy. Call 0800 044 5407 or complete the form below and we’ll call you.
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