Debts are not great at all.
They can be quite frustrating to manage and can leave you with exhaustive financial conditions.
As a self-employed person, you are already handling a lot of responsibilities. It is time you take these debts in a way that they should be repaid soon in order to help you with the scopes to concentrate on the most critical work you are doing – employing yourself and earning all by your own means.
With that being said, we can now go on thinking more on a debt management plans for you.
A Debt Management Plan or a DMP is something that you can surely use to understand the nature of repayments of the debt of your creditors. It is actually an assisting factor.
If you use it in the right ways, chances are you will stay stress-free for the entire time you are going to repay those debts. You will also face less tension and financial stress to manage those problems.
So, the question is if you are going to have e DMP in case you are self-employed.
The simple answer to that is ‘yes’.
Now it is time for you to find out some more details about it.
What Do We Mean by a DMP and How I Can Help
The DMP is simple if you use it in the right ways.
As a matter of fact, the DMP has to be one of the most effective tools for the self-employed to manage debts. It is because a debt management plan basically works in favour of you rather than exhausting your resources to refund your debtors.
So, what are we looking at with the DMP here?
A Debt Management Plan or the DMP means a particular term, by which you agree to pay back the money to your debtor, which they lent you. You are going to repay in the form of instalments. It is quite similar to the way you repay money to direct lenders for something like a self-employed loan with no credit check. The instalments you decide to pay are affordable to you. A DMP comes to existence only when debtors also agree to the instalment term you have proposed to them.
A DMP is rather a plan to help you with reduced payments towards your debt.
You got the idea, right?
Now that you know what the definition of DMP, you also need to learn a few more factors about the said financing option so that you get to learn new things about it to plan your instalments in the most effective ways possible.
What do You Need to Know about a DMP?
DMPs are meant for both you and your debtors.
We get it.
But since these plans are basically meant for you, they might have some restrictions.
Or you can simply call them regulations.
- You can get a DMP plan approved for a personal debt. But you may not get the plan approved for business debts.
- DMP charges might get a bit difficult to pay for because of business debts as there are chances of a high or a frozen interest rate. Besides, you may not get the benefits of that affordability you are looking for that you get with a DMP.
- You have to pay the full amount to your creditors in this plan, though. You might take time to do so because you get to choose your instalment amounts.
Looking at these viewpoints, we can come to the fact that a DMP is a suitable option for self-employed people who are into personal finance debts. In case they have a larger debt, such as business debt, then they need to think about some more features and talk to direct lenders about self employed loans no credit check.
What Type of Debts Can Be Included in the DMP?
You cannot force all the debts into the DMP. That is going to be an insane practice.
Why worry when the lending industry has set ground rules for these debts?
When we are thinking of debts in terms of helping the self-employed to manage them, we can include these kinds of debts as mentioned below:
- Any kind of personal debts
- Bank Loans
- Credit Card Debts
- Overdrafts
- Catalogue Debt
If there are debts we can include, then there are debts we cannot include.
The kind of debts not included in a DMP is:
- Priority Debts
- Secured Loans
- National Insurances
Some rules have to be followed. Scrolling down, we will know some more ground rules in making payments regarding the DMP.
Things to Keep in Mind While Making DMP Payments
Let’s say you are paying the DMP instalment and, at the same time, you are paying the HMRC. In this way, the HMRC will be counted as living costs.
Now, if you have money to pay off as priority debts, then they are to be paid separately from the DMP costs.
As mentioned earlier, some types of debts, such as mortgages or secured loans, council debts, and governmental debts, are not meant for a DMP because they come with a fixed rate and are not flexible to the terms a DMP generally has.
These rules are there because the Debt Management Plan for the self-employed has a flexible nature due to the variability of the income statement of the individual. Why is that? It is because the self-employed individual’s income or revenue is not always at a stable rate and can vary according to the market and the workforce.
We are going to discuss this now.
- How Making the Payments for DMP is Done?
Making DMP payments is easy. However, determining the costs may be of some complexity.
Just like you use an advanced loan calculator to find out the instalments of a debt consolidation loan UK; you have to press some buttons in the calculator to finalise the value of your DMP instalments.
Here is how to do that in some steps:
- We need to go with the rule of the average. At first, you will calculate the amount of revenue your business generates in the matter of a year or half a year on average.
- Then, you are going to make the same calculation with the same time span for HMRC payments (if any).
- When you are done with the HMRC payment, then it is time for you to subtract it from the net amount you have made out from revenue payments,
- Now that you have the subtracted result, you will have to use this to make your DMP Payments. You will now calculate the average DMP for the same time frame. But you must keep in mind that there has to be some amount left for you to save after paying off the DMP instalments. The idea here is to keep the latest amount before paying the DMP higher than the actual average DMP so that some money is ultimately saved.
- Interesting Question: Can One Use a Credit Card for DMP?
This is a good question.
Logic will guide us to the answer.
You can use a credit card in paying off the DMP instalments. But a DMP is the kind of payment that gets reduced towards the debt. What it means is reduced payments and that can make it troublesome for the credit score to go high.
As a matter of fact, it is going to go down in the logical sense.
You need a solution here.
Either you do not use a credit card to make DMP payments and use online methods. Such as Internet banking to pay off the instalments.
In other cases, you can fix a key credit supplier or a certain credit card to look after your business separately,
To Conclude
Now that you know to make the Debt Management Plan (DMP) be conducted wisely. You can reduce some of the financial stress you have been suffering for a long time.
However, always keep an eye out for the revenue generation and smart calculation of the DMP and the HMRC Payments (if any).
