If you are having difficulty with debt it is likely that you will first try and juggle your payments and hope that the situation gets better. The problem is if you start paying one debt with another the problem will just become worse.

Eventually you will get into payment arrears and at that point consider a debt solution such as a Debt Management Plan (DMP). However waiting until you get into payment arrears is a mistake.

Can you start a DMP before you have payment arrears?

The right time to deal with a debt problem is as soon as you know you can no longer afford to make your payments. At this point you may not have any payment arrears. However if you sit down and review your financial situation it is clear that your income is not enough to pay your debts.

Starting a DMP at this point is not only possible but recommended. Your income and expenditure budget will show your creditors that you cannot afford to continue making your payments. They will understand that if you carry on as you are you will end up borrowing even more and making the situation worse.

Your creditors will therefore accept that you need to start a DMP. If your payment offer is reasonable they should then help you as they can see from your financial statement that you cannot afford to pay them any more.

Why start your DMP before you get into payment arrears?

Starting debt management before you actually get into payment arrears will deliver specific benefits. Firstly your debt will be lower and easier to repay. This is because you have not yet gone down the road of borrowing more to try and maintain your payments.

Secondly when you start a debt management plan you will often be required to change your bank account particularly if your bank is a creditor. This will be far easier and you will have a greater choice of banks if you have not yet missed any of your debt repayments and your credit rating is still good.

If you get into Debt Arrears your Credit Rating will be affected

If you are struggling to pay your creditors it is important to take action as soon as possible. One of the reasons you might be delaying starting a DMP is that you are worried that it will affect your credit rating.

You are right. However this is a false worry. You are only thinking about carrying out the Plan because you do not have the money to pay your creditors. Given this missed payments and a worsening credit rating will be inevitable anyway.

The longer you try to struggle to pay your debt, the more likely it is that you will start using one to pay another and make the situation worse. It is therefore perfectly acceptable to start a debt management plan before you actually begin missing payments to your creditors. More often than not it is the right thing to do.