There is no guarantee that creditors will freeze their interest in a Debt Management Plan. However there are things you can do to improve your chances that they will.
In this article:
- Will interest be frozen if you start a DMP?
- How to improve your chances of interest being frozen
- Options if interest is not frozen
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Will creditors freeze interest and charges if I start a DMP?
Creditors are under no legal obligation to freeze interest if you start a Debt Management Plan (DMP) How likely is it that interest and charges will be suspended? How long will it take before interest is frozen in a DMP? To find out more please visit: http://beatmydebt.com/debt-management-plan-frequently-asked-questions/will-interest-charges-be-stopped-if-i-do-a-dmp
Will Interest be Frozen if you Start a Debt Management Plan?
One of this solution’s significant downsides is that your creditors are not obliged to stop adding interest and late payment charges to your accounts. If they do not it could add years to lengeht of the Plan.
If you maintain your agreed payments on time it is likely but not guaranteed
As a result despite being in the Plan it is possible that the balances on some or all of your accounts could continue to increase.
If your creditors do not agree to your propsed payments it is unlikely they will freeze their interest charges.
How to Improve your Chances of Creditors Freezing Interest
A DMP is not a legally binding solution on either you or your creditors. This means that they are under no legal obligation to stop adding interest to your account balances and will only do so if they feel the amount you are offering to repay them each month is reasonable.
It is therefore critical when negotiating with creditors that you offer to pay as much as you can based on your income and living expenses budget. Clearly you need to include all of your required expenses in your budget but you must take care that you stick within some clearly defined guidelines.
In addition to this once you have worked out what your payments will be you should make sure that you start paying these straight away and maintain them on time each month.
As long as you are paying as much as you can afford and you are maintaining these payments regularly then most of your creditors should stop adding their interest charges. However it might take three to four months for this to happen and they will also reserve the right to start adding interest again if you do not maintain your payments.
What are your Options if Interest is not Frozen?
Consider why you started the Plan: if you are using the plan to give you a short term breathing space then the fact that some interest is added might not matter that much
If this is not happening there is nothing to stop you reviewing your options and changing to an alternative solution.
The fact that a DMP will not give you a guarantee that interest and charges will be stopped is not necessarily a reason to avoid this solution. There may be many reasons why it might be the right one for you.
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