Debt Management Plan: A Guide to Paying Off Debts

If you’re struggling to keep up with credit cards, personal loans or store cards, a Debt Management Plan (DMP) could help you take back control of your finances.

This guide explains what a DMP is, how it works, whether it might be suitable for you, and how to get one.

What is a DMP?

A Debt Management Plan (DMP) is an informal debt solution that allows you to pay off non-priority debts at a rate you can afford.

Non-priority debts include:

Credit cards
Personal loans and overdrafts
Store cards, catalogue and in-store credit
Payday loans or home credit
Borrowed money from family and friends

With a DMP, you make one reduced monthly payment to a DMP provider, who then distributes it to your creditors.

A DMP is not legally binding, which means:

You can cancel it at any time without penalty
Your creditors are not legally required to freeze interest or charges
Your creditors may still take legal action if they choose to

Several debt management companies provide DMPs, but many charge a fee. Free providers, such as charity-backed organisations, ensure all your money goes towards clearing your debt instead of administration costs.

How does a DMP work?

Assessment – Your DMP provider reviews your income, spending and debts.
Proposal – They agree an affordable repayment plan with you.
Negotiation – They contact your creditors to request acceptance, freezing of interest, and reduced or paused charges.
Payments – You make one monthly payment to the provider, which is then divided among your creditors.

Which debts can be included?

You can only use a DMP for non-priority debts (listed above).

Priority debts cannot be included in a DMP. These must be paid first, as the consequences of not paying them are more serious. Priority debts include:

Mortgage or rent
Council tax
Gas, electricity and water bills
Court fines
Child maintenance

How to get a DMP in 2025

If you think a DMP is right for you:

Choose a fee-free DMP provider so all of your payments go towards your debt.
Make sure the company is authorised by the Financial Conduct Authority (FCA). You can check on the FCA Register.
Ask what happens if your circumstances change – can you pause, reduce or cancel your plan without fees?

How will a DMP affect me?

You’ll be paying less than your contractual monthly repayments, so your credit rating will be negatively affected.
Repaying debt may take longer, as your monthly payments are reduced.
Creditors may not freeze interest and charges, so the amount you owe may not fall as quickly as expected.
Creditors could still decline to co-operate or continue contacting you.

Is a DMP right for me?

A DMP may suit you if:

You are struggling to keep up with credit cards or personal loans.
You can pay your priority debts (rent, mortgage, council tax) and essential living costs.
You have some disposable income left each month to pay towards non-priority debts.
You want someone to liaise with your creditors on your behalf.

How will a DMP affect my credit score?

Your credit report will show reduced payments, which lenders view as evidence that you’ve had difficulty repaying what you owe.
This usually lowers your credit score and makes it harder to get approval for new credit.
If you are accepted for borrowing, lenders are likely to charge higher interest rates.

How long does a DMP stay on your credit file?

Debts stay on your credit file for six years from the date they are either fully paid off or defaulted.
A DMP means you are likely to clear debts more slowly, so they may remain visible on your report for longer.
Credit reference agencies may add a DMP flag to accounts, showing lenders that payments are managed through a plan.

How to rebuild your credit after a DMP

When your DMP ends, steps to improve your credit score include:

Closing settled accounts or returning to contractual payments
Making all future payments on time
Limiting applications for new credit while your report recovers

Over time, your score should improve as old debts age and drop off your credit file.

Get free debt advice before starting a DMP

Always seek independent, free debt advice before committing to a Debt Management Plan. The right debt solution for you will depend on your personal and financial situation.