Not sure whether a DMP or an IVA is right for you?
A Debt Management Plan suits some people better than an IVA, and you need to know which applies to you. IndividualVoluntaryArrangements.net helps you compare the two using your own figures. If you could clear your debts in a reasonable time through a DMP, we'll explain that, along with where free DMP providers can be found. If an IVA would give you a better outcome, we'll explain why.
Either way, you'll come away knowing what each option would cost you, how long it would last and what it would mean for your credit file.
What the comparison covers
- How long a DMP would take to clear your debts at an affordable rate
- Whether an IVA could reduce the total you repay
- The legal protection each option does or doesn't give
A DMP lets you make one affordable monthly payment, which is shared between your creditors. Unlike an IVA, it isn't legally binding and there's no write-off: you repay your debts in full, just more slowly.
How a DMP works
Work out a budget
A DMP provider looks at your income and essential spending to work out what you can afford.
Creditors are contacted
The provider asks your creditors to accept reduced payments and, usually, to freeze interest and charges.
One monthly payment
You pay the provider once a month, and they distribute the money between your creditors.
Regular reviews
Your plan is reviewed regularly and continues until your debts are repaid or you move to another solution.
Pros and cons of a DMP
What a DMP does well
- Flexible: payments can change as your circumstances change
- Not a form of insolvency
- Not listed on the Insolvency Register
- Free DMP providers are available
- You can stop at any time
Where a DMP falls short
- Not legally binding on creditors
- Interest freezes aren't guaranteed
- No debt is written off
- Can last many years
- Defaults may still be added to your credit file
Which debts can go in a DMP?
A DMP can only include non-priority debts, such as credit cards, loans, overdrafts, store cards and catalogue debts. Priority debts like mortgage or rent arrears, council tax and energy arrears must be dealt with separately.
DMP or IVA?
A DMP is often better if you could repay everything within a reasonable time, or your circumstances are likely to improve. An IVA may be more suitable if your debts are large, you can't realistically repay them in full and you want legal protection and a fixed end date. See our full IVA vs DMP comparison.
Don't pay for what's free. Some debt charities offer DMPs free of charge. If a provider charges fees, make sure you understand what they are and how they affect how quickly your debts are repaid.
How long would a DMP take to clear my debts?
That depends on how much you owe and how much you can afford each month. As a simple example, if you owe £15,000 and can afford £200 a month, a DMP would take around 75 months, a little over six years, assuming your creditors freeze interest. If they don't, it could take considerably longer.
By comparison, an IVA usually lasts five years, after which the remaining balance of the included debts is written off. For someone with larger debts, that difference can be significant. We'll run the numbers for your own situation so you can see the comparison clearly.
Do creditors have to freeze interest on a DMP?
No. A DMP is an informal arrangement, so creditors aren't legally obliged to freeze interest or charges, or even to accept reduced payments. Many do agree, particularly when a recognised DMP provider is involved, but some continue adding interest. If that happens, your debts may barely reduce, and a more formal solution may be worth considering.
Can I switch from a DMP to an IVA?
Yes, and it's quite common. People often start with a DMP, then find that interest hasn't been frozen, their debts are taking too long to clear, or their circumstances have changed. Moving to an IVA can give you legal protection and a fixed end date. Equally, if your income improves, you might be able to repay through a DMP more quickly than expected. We can help you weigh this up at any point.
Choosing a DMP provider
Several debt charities offer Debt Management Plans free of charge, and some commercial firms charge a monthly fee. Whichever you use, the provider should be authorised by the Financial Conduct Authority, which you can check on the FCA Register. If you're paying fees, ask how much they are and how they affect how quickly your debts are repaid, because every pound in fees is a pound that doesn't go to your creditors.
What happens if I miss a DMP payment?
Missing a payment can lead creditors to withdraw any interest freeze or start chasing you again, because a DMP isn't legally binding. If you're struggling, contact your provider straight away. Payments can usually be reduced if your circumstances change, and that flexibility is one of the main advantages of a DMP.
Get a personal DMP or IVA comparison
If you're not sure which route is right for you, send us an enquiry using the form at the top of the page. We'll look at your figures and explain how a DMP and an IVA would compare in your case, including how long each would take and what you'd repay in total. You can also read our full IVA vs DMP comparison.
You don't need to have decided anything before getting in touch. Many people contact us because their current arrangement isn't working, or because they're unsure whether their debts have grown too large for a DMP to handle. A short conversation is often enough to see which direction makes sense, and you're free to take your time afterwards to think it over or speak to a free adviser.