what are the pros and cons?

[ben.m]

I am considering taking out a debt management plan with Debt Matters. Would you recommend this company? what are the pros and cons?

[Viki.W]

Hey ben, welcome to the forum, a few forum members are with debt matters so they may be able to give you their opinion.

With regards, pros and cons of a DMP.

Pros- your payments will be less than they are now.

Cons- It may take some years to clear your debt and there is no protection from creditors if they decide to add interest and charges or ask for the full amount to be paid.

Please post a few more details about you debt and circumstances so the experts can help you. Viki X

[ben.m]

I have around £8500 debt + £1300 overdraft with one highstreet bank. This is split across two credit cards and one graduate loan. I have spoken to the bank regarding a managed loan at a hefty 20% interest and monthly payments of £250. They would also suspend my maestro card privileges.

Debt Matters have indicated that they could reduce my payments to around £200 (25% of which goes to Debt Matters so a real payment of £175 to the bank) and have almost guarateed (99.9%) that my interest and charges on my debt will be frozen. They have indicated the first two installments of £200 will be taken as payment for the plan and for the negotiations with the bank. The 3rd months payment (providing negotiations go smoothly) will then be made as payment towards my debt.

They have also advised that I withdraw all available cash from my account (and to do this on payday when I am most liquid) and to open a current account with a new bank.

I have extremely new to this process. Are these terms common in the industry? Are they good/bad and as customer focused as Debt Matters claim?

[Viki.W]

They are right about opening a new bank account if you bank with one of your creditors. I'm hoping someone on here who has dealt with debt matters will reply to your post as I can't help on that one. I think if you are going to enter into this, you really need them to be able to freeze interest and charges. Please wait for some more replies and keep posting. Viki X

[cfnc]

If it is a DMP you are looking at, as I do not think you qualify for an IVA, go to a fee free charity to manage your DMP, CCCS is one of them.You should not be paying a fee for debt management.

It is true that they may get interest frozen but your creditors could add it on again if they wish. Your creditors will still be able to ring and write to too.

Good luck for the future but please do go to one of the free charity debt management companies, tey are just as good if not better.

Kirsty

[ben.m]

I am aware of these charities but do they have the same ability to freeze interest and charges?

How does an organisation like DM go about this? What Im failing to understand is why the Bank would actually go into negotiations with an organisation when its knows it will only be worse off. There seems to be no contract signed either between the bank & DM or myself & DM.

The guy on the phone was full of flowery sales jargon but seemed to have a ligitimate answer to all of my questions. What power do they have to hold the bank to these terms? Ugh it's all so confusing.

[cfnc]

Yes they do have the same bargaining power, infact before we decided to do an IVA we were doing a DMP on our own and a few of our creditors wanted us to use the charity DMP's.

Think of it this way if you are paying a monthly fee for a DMP and you had a chance of a fee free one, which would then mean more money for your creditors, who do you think your creditors would choose?

Also I am pretty sure that the charity ones are actually funded by the 'creditors'

Try moneysavingexpert forum on 'debtfree want to be' tread. they are not as friendly on here and can be a little judgemental, but just have a read and see.

Kirsty