Living on a debt solution

How are my payments calculated on a Debt Management Plan?

Posted 20 March 2013

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We set repayments at an affordable level for people on debt management. We ensure you have enough to live on before repaying your lenders.

Debt management payments are always set at an affordable level, so you only repay as much as you can realistically afford. If you're struggling to repay debts, it's likely you'd pay less under debt management.

You might be wondering how the repayments are calculated to make sure they're affordable.

Income minus essential expenditure

Put simply, to calculate what you can afford to pay towards your debts, you need to look at your income minus your essential expenditure. You must keep enough of your income to live on before making debt management payments.

Essentials include feeding and clothing yourself and your family, and keeping a roof over your head. We make sure you can do this while you're on a debt management plan.

Find out more about debt management plans here.

'Disposable' income

We call the money you have left after paying for essentials your 'disposable income'. This is what is used to repay your lenders. You make one repayment to us every month and we divide this between your lenders, and take our fee directly from that.

If you have lots of lenders, we work out how much of your repayment should go to each of them. We have rules about making sure repayments are fair on everyone, which includes your lenders. You can be assured that we work hard to ensure repayments are affordable for the people we help too.

Things to remember

Lenders don't have to accept lower repayments. We negotiate with them on behalf of the people we help, explaining why it's the best option for everyone involved. Once a debt management plan has been agreed, we also take over all contact with lenders until the plan comes to an end.

Entering debt management can affect your credit rating in the medium to long term, but if you're having debt problems, we strongly recommend you find out more about the options that are available to you.

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.