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Tackling your debts

Is there an age limit for a debt management plan?

Posted 10 May 2013 by Shelley Bowers

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If you’ve got problem debt, you may want to use a debt management plan to help. But, are there any age limits?

Quick and simple answer: there’s no upper age limit on having a debt management plan (DMP). Right, now we’ve established that, let’s look in a bit more detail about how DMPs work and who they can be suitable for. 

Getting into problem debt is not something only young people do, anyone over 18 can get into financial difficulties, at any time. Usually, people are managing their repayments with no issues until something you didn't expect – say an illness, a relationship breakdown, a bereavement, or if your income drops when you retire – turns a manageable level of borrowing into unmanageable debt.  This is where a DMP could come into its own. 

As people head into retirement, they most probably hoped or expected to be debt free.  However, these days more people are finding that they still have outstanding debts when they retire and that they want to continue to use credit when retired.  Fortunately, whatever age you are debt help is always available and there are a number of debt solutions that may be suitable. If you’re in this position you really need to think about speaking to a trained debt advisor before making any decisions. You can speak to one of our advisors, we’re only a phone call away. We’ll listen to your circumstances and tell you what the best way forward is for you. 

Just use the ‘contact us’ buttons on the left of the screen or take our Money Smart report by clicking the link below.

 find my solution

If you’re not ready to take that next step yet, and you just want some more information, read on to find out how a DMP could help and how your age might affect it. 

How can a DMP help me?

A DMP can help you in a number of ways. The first, and one of the most important benefits, is to bring your monthly payments down to a level you can afford. This means you’ll be able to pay off what you owe and still have enough money to pay all your essential bills

This should help you feel less stressed immediately. There’s nothing better than knowing you can put food on the table, keep your roof over your head, and pay your bills. After all, no one wants to be choosing between paying the credit card bill or having the heating on.  

Whatever age you are, when you’re in the middle of it, problem debt can really get you down. And, when you’re a little older and may be living on a very limited income, the stress can be even greater. It can even lead people behaving and acting in ways they wouldn’t normally do, which adds extra stresses and strains to relationships, making life less enjoyable than it should be.  A DMP can help relieve this stress by making your payments manageable.

Another aspect that affects the levels of stress you might feel is being contacted by your lenders. When you get behind with your payments your lenders will try and get in touch with you, often by letter, phone, email and text.  Many people find this stressful, especially if they’ve fallen behind with a number of lenders who are all contacting them at the same time. 

So, one of the first things your debt advisor will do if you decide to enter into a DMP, is contact all your lenders to tell them that you’re now on a DMP and that all contact should now be through them. That’s one less thing to worry about. 

And a third benefit is that you have the knowledge that everything you owe will be paid off when you get to the end of your DMP. Admittedly, it will take you longer than originally expected, but you will pay what you owe. The idea of paying what is due and not owing anyone can be very important for some people, if you’re one of them a DMP may be right for you.   

The downsides your age can bring if you want a DMP

Of course it’s great that you can get a DMP at any age, but having one when you are getting older does have its disadvantages too. Because DMPs lower your payment amount, they’ll also extend the time it takes you to pay off what you owe. If you’re nearing retirement age, you could find this takes you past the time when you may experience a drop in income. You’ll be living off your savings, investments (if you have any) and your pension. This may make a DMP unsuitable if you can’t afford to make any sort of payments towards what you owe. 

If this sounds like you, it’s not the end of the road, there will be other more suitable options available depending on your circumstances. We’d advise you speak to a trained debt advisor. You can use one of the ‘contact us’ links on the left of the page if you’d like to speak to us.      

Other downsides 

The fact that the payments will be stretched over a longer period of time also means that you may end up paying more than you would have done. This is because your lenders are under no obligation to freeze interest and charges on what you owe, although many will, it’s not guaranteed. 

If you’ve been having issues with paying what you owe in the past, and you’ve missed payments, it’s quite possible that you may already have defaults on your credit file. When you enter into a DMP, it’ll also be noted on your credit history, because you’ll be paying less than the amount you agreed to when you borrowed the money. This will be noted on your credit record too and will stay there for six years.   This could be an issue if you were thinking about borrowing money again in the future, as your credit history is what most lenders use, along with their own set of questions, to make lending decisions. If they see that you’ve had problems paying what you owe in the past, they may be more cautious about lending to you. It doesn’t mean they won’t, it just means that they might offer lending to you at a higher cost than you would have received had your credit score been a little better.    

For a full explanation of the advantages and disadvantages of a DMP, see our dedicated page.  

Might Debt Management be suitable for me? 

Knowing whether a debt management plan is suitable, or if there are other more suitable debt solutions for you, is best left to the experts. A trained debt advisor can go through your finances and advise you on the best way forward. But, if you want a quick look to see if a DMP might be right for you, ask yourself these questions.

• Are you unable to make the debt payments you agreed to?

• Do you have some money left over every month that could go towards your debts? (This is after you've paid for the things you need, which includes your home, your food and bills and other essential expenditure.)

• Could you afford lower repayments than you're paying now, and still repay your debts within the next few years?

• Would it help if your lenders froze interest and charges? (This is often possible, although not guaranteed, on a debt management plan.)

• Has a debt adviser told you a debt management plan could be suitable?

• Would you like to avoid insolvency because of personal reasons or because it could affect your assets or career? (You cannot practise some professions if you enter insolvency.)

If you answer ‘yes’ to most of them, it might be worth you chatting through DMPs as an option for you with one of our advisors. And, if they think that a DMP is not the right solution for you, there are others to choose from. You can see all the debt solutions we offer here. 

 

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.