Changing Reasons For Using Debt Management Plans

During the past few years, a large number of UK residents have turned to a debt management plan, or DMP, to help manage their debt. The many years of affordable credit that encouraged overspending finally came to an end. People found themselves in debt with no immediate way to repay it. A DMP was the best way for many of them to manage the situation because it was convenient and readily available.

Circumstances change and you may have been affected by COVID19, lost a job, made redundant, or separated from a partner and you may now qualify for a different debt solution such as an IVA, Debt Relief Order or Bankruptcy. There are many changing reasons for using a debt management plan service. Fill out the form today to speak to a friendly advisor

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Rising prices in recent years caused disposable incomes to shrink, worsening the financial situation of many people who overused available credit. People with an ongoing burden of debt needed a way to handle it while maintaining their households. They entered a DMP and many are still in it today. For them, cheap and easy credit is no longer a priority. Instead, they are focused on repaying their debts.

These days, most people are trying to reduce their ongoing expenses

Few are willing to borrow huge amounts of money to make unaffordable purchases. Those who often find that obtaining this amount of credit is not easy. These conditions would seem to help prevent future debt issues. However, new types of debt-related problems have arisen.

Payday lenders have established a strong presence in the UK and are wreaking havoc on consumer finances by charging very high-interest rates. What the public does not realize is that most of these loans are not used to pay for a necessary item that cannot be afforded, such as a replacement appliance. In fact, they are not even used to pay for a holiday getaway. Sixty percent of UK payday loans are used to manage daily household expenses including bills.

Credit is not as readily available now so people are using other sources at their disposal

Unfortunately, many payday loan customers cannot afford to repay what they borrow. This puts them in a bad financial position, landing them in debt quicker than they realize. DMP providers are dealing with more payday loan customers every day, negotiating with lenders to establish repayment plans that these borrowers can afford.

Catalogue debt has become another issue for many UK consumers. As their disposable incomes are reduced, consumers are using catalogue credit instead of buying items with cash. Each catalogue may offer a much lower amount of credit than the credit card limits that consumers previously received. Nonetheless, people have accrued a substantial amount of catalogue debt. The Money Advice Trust reported that catalogue debt issues once represented eight percent of the calls it received. Today, it is the topic of 13 percent of consumer calls.

In addition to payday loans and catalogue debts, more people are turning toward a DMP because they have amassed energy debt

Energy costs are increasing and according to a recent study, if these increases continue at their current rate, 27 percent of UK households will not be able to afford their energy bills within just three years. Though debt management plan customers may now have less debt overall, their debts now have higher interest rates and shorter repayment terms.