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It’s easy to get confused about debt, especially when so many of the different solutions have similar names. No better example of this exists than when comparing Debt Arrangement Schemes (DAS) vs Debt Management Plans (DMP).
If you came to this article asking yourself, “What’s the difference between a Debt Management Plan and the Debt Arrangement Scheme?”, you have come to the right place.
At their core, DMPs and DAS aim to achieve the same thing. Take existing, unaffordable debt and arrange an affordable repayment plan with your lenders.
If you would like a no obligation, confidential chat with a debt advice expert – you can contact our team on 0141 846 5065 or book a callback here.
What is a Debt Management Plan (DMP)?
A DMP is an informal debt solution. It is an agreement with your creditors to alter your repayment plan to something more affordable. Learn more about Debt Management Plans.
What is a Debt Arrangement Scheme (DAS)?
The Debt Arrangement Scheme is a formal debt solution created by the Scottish Government. It is like a DMP, but with key differences including freezing of interest & charges.
Debt Management Plan and Debt Arrangement Scheme compared
| Debt Management Plan | Debt Arrangement Scheme |
|---|---|
| Legally Binding on Creditors? | |
| No | Yes |
| Consolidated monthly payments? | |
| Third party service only | Yes |
| What debts can be included? | |
| Non-Priority Debts | All Unsecured Debts & Mortgage Arrears |
| Who is eligible? | |
| Anyone in Debt (minimum debt may apply with Debt Management Companies) | Anyone living in Scotland & not in another insolvency solution |
| Will it affect your credit score? | |
| Yes | Yes |
| Interest & Charges Frozen? | |
| At creditors discretion | Automatically |
| How long will it last? | |
| Until debt, interest & charges repaid | Until debt is repaid |
Is it Legally binding on creditors?
A DMP is an informal solution. You can arrange a DMP on your own with your creditors or have a third party organise it for you (fees may apply – to find more information on third party DMP providers who do not charge a fee visit Money Helper). A DAS is a formal solution, it cannot be entered into without help from a money adviser, but there is no fee to enter one.
Do you get Consolidated (one monthly) repayments?
In a self-arranged DMP debt repayments are not consolidated, as payments still need to be made to each creditor separately. In a DAS (and in DMPs managed by a debt management company) you will make a single monthly payment to your solution provider, and they will then distribute this between each creditor.
What debts can be included?
Usually, in a Debt Management Plan, only non-priority debts like bank loans and credit cards can be included. Priority debts like mortgages and tax arrears cannot be included in a DMP. In a DAS, all unsecured debts can be included e.g., unsecured bank loans, credit cards, council tax etc.
| Debt Management Plan | Debt Arrangement Scheme |
|---|---|
| Unsecured Bank Loans | |
| ✓ | ✓ |
| Credit Card | |
| ✗ | ✓ |
| Council Tax | |
| ✓ | ✓ |
| Payday Loan | |
| ✓ | ✓ |
| Mortgage | |
| ✗ | ✓ |
| Overdrafts | |
| ✓ | ✓ |
| Store Cards | |
| ✓ | ✓ |
Who is eligible?
Anyone can arrange a DMP directly with their creditors, though accepting it will be at the creditors’ discretion. Most Debt Management Companies & charities have a minimum debt requirement before you can work with them, however for some of them it can be as low as £5 per creditor.
The Debt Arrangement Scheme is available to anyone who lives in Scotland (or has in the last 12 months) and is not in another form of personal insolvency.
Will it affect your credit score?
Both DMPs and the DAS are likely to affect your credit file. A DAS will show on your credit file automatically, and in a DMP your creditors are likely to notify credit agencies you are behind with your payments.
What Interest rates & fees are involved?
In a DAS, the interest and charges on your debts will be frozen. In a DMP, freezing of interest and charges is at the discretion of your creditors, meaning your debts may continue to grow, or be paid off at a slower rate.
How long will it last?
The length of DMPs and DAS are dependent on your level of debt and how much you can reasonably afford to pay each month. While there are no official time limits on a DMP or DAS, it is unusual to see either last more than 10 years. If it would take more than 10 years to pay off your debt at an affordable rate, there may be better debt solutions for you.
Our Opinion
While an available option, Debt Management Plans can be difficult to manage individually. In addition, since interest and charges are not legally frozen in a DMP, it may take longer to repay your debt than in a DAS. Reach out to our team for a confidential chat with debt experts to find the right solution for your circumstances.
