Can I Pay Off My Debt Management Plan Early? StepChange (2024)

FAQs

Can I pay off Stepchange early? ›

Yes, you can end your plan early.

You need to: Make a lump sum payment. Sum must be equal to the total outstanding payments.

Interest, fees and charges are frozen from the date you apply for a debt payment programme and are written off completely when it is completed. If you have made payments for 12 years and have paid 70% of your debts, you may be able to end the debt payment programme early. This is called a composition.

At the end of your debt management plan, your accounts will be completely paid off, and you'll be debt free.

Personal Loans When On A DMP

Unsecured personal loans will likely be difficult to obtain whilst on a debt management plan, however some people may still find there is still a small pool of potential lenders. Loan products such as guarantor loans and payday loans fall within this category.

Paying off a loan early could affect your credit score in the short term. If you're paying off a loan consistently, it shows to lenders that you can manage debt responsibly. If you pay off the loan in full, the account is then closed so the lender won't have this evidence.

Paying off a loan may lower your credit score, but if you practice good credit habits the effect will be minimal.

To cancel your DMP, you need to contact your provider and ask to cancel. They will inform your creditors that the agreement has been cancelled, so you can expect to start dealing with them yourself again.

When your DMP ends, you can close the accounts you've paid off, or start making full payments again. Your score should recover over time if you continue to meet all repayments. Records of your debts will take six years to drop off your report, but lenders may pay less attention to them as they age.

Can you reduce the payments? The amount you pay into a DMP doesn't have to be set in stone. If you're struggling to make the payments each month, ask your provider whether it's possible to reduce the monthly payments. Bear in mind that if your payments are reduced, your debt may take even longer to pay off.

The idea of having a notation on your credit history may initially send up red flags. But while a debt management plan does affect your credit history, it does not have a lasting negative effect on your credit score. When you agree to close all of your credit accounts, your credit history stops.

What happens after 6 years on a debt management plan? ›

Your credit history starts to look better after your DMP. Information like missed payments or court action is removed after six years. If an account has defaulted, the debt is removed six years after the default.

Debt management plans (DMP) are flexible. This means you may be able to pay off a DMP early. You can do this by increasing monthly payments or paying a lump sum.

If, for whatever reason, you come into money during the course of your DAS, it is possible to pay the scheme off early by using the lump sum payment to clear your balance. Once you've repaid all the money you owe, you will be released from the terms of your DAS and will be free to move on with your life.

A DMP may be a good option if the following apply to you: you can afford your living costs and have a way to deal with any priority debts, but you're struggling to keep up with your credit cards and loans. you'd like someone to deal with your creditors for you. making one set monthly payment will help you to budget.

Paying off the loan early can put you in a situation where you must pay a prepayment penalty, potentially undoing any money you'd save on interest, and it can also impact your credit history.

The short answer is yes, there can be benefits to paying your credit card early. But there's more to understanding how making credit card payments could help you boost your credit scores. Paying your credit card early means paying your balance before the due date or making an extra payment each month.

This can be either through making all of the required agreed repayments on time or by paying out your Debt Agreement early. Provided you meet your obligations, your Debt Agreement will be removed from your credit file after 5 years (unless your debt agreement is over a longer term).

There's no penalty for paying back your installment loan early.