You may get a pay rise during your Debt Management Plan. If so, you don’t have to increase your payments. There are actually a number of options open to you.
Included in this article:
- Do you have to increase your payments after a pay rise?
- Can you save the extra money?
- Could you change to a different debt solution?
Rather speak to a person? Call 0800 077 6180 or fill in the form below and we’ll call you
Do you have to increase your DMP payments after a pay rise?
One of the advantage of a Debt Management Plan (DMP) is it is an informal agreement. As such if you get a pay rise during your plan you are not legally obliged to increase your payments.
Because of this you do not even have to tell your creditors about the increase if you do not want to. You can use the extra money for whatever you want.
If you are working with a debt management company, they will normally ask you to do an income and expenses review each year. You will therefore probably have to tell them about your pay rise at that time. However they can’t force you to use this to pay more to your creditors.
The advantage of increasing your DMP payments after getting a pay rise is that your debts will be paid back faster. Your plan will then end sooner.
Can you save the extra money?
Instead of increasing your payments, after you get a pay rise you can save the extra money you get. There are some significant advantages of doing this.
Firstly, any money you are able to save will give you a cushion to fall back on if you have an unexpected financial emergency. If you have unexpected expenses such as a car breakdown or need to buy a new home appliance you will have this money to fall back on and not risk having to stop your plan payments.
Secondly if you manage to save a sizeable lump sum, you could use this to pay your DMP early. If you have been in the plan for 6-12 months, any one or more of your creditors might agree to take a cash lump sum in full settlement of the debt you owe.
Settling your debts with money saved after getting a pay rise will mean your DMP is paid off faster. The payment these debts were receiving can be redistributed to the others thus paying them faster as well.
Could you change to a different debt solution?
You may have decided to start your DMP because you did not have enough disposable income each month to do an IVA. After getting a pay rise this situation could have changed.
If your additional income means you can now afford to pay at least £100/mth swapping to an IVA is now possible. The advantage of this is that IVA payments usually last just 5-6 years. If your plan is likely to last longer than this even with your extra income, you should consider changing.
Because it is informal and flexible, you are allowed to stop your Debt Management Plan any time and change to a different debt solution if you wish.
Want to discuss your options after getting a pay rise? Give us a call (0800 077 6180) or complete the form below.
Arrange a call with a DMP Expert
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.