Debt Management Plan car finance can be possible, but before you jump in, we want to ensure all our customers are making a fair and informed decision. The guide below aims to look at how Debt Management Plans work and if it’s possible to get a car on finance whilst on a Debt Management Plan. We also offer advice on increasing your chances of being approved and the factors you should consider when choosing whether it’s right for you and your DMP.
What is a Debt Management Plan?
A Debt Management Plan (DMP) is an agreement which is put in place for you to pay back what you owe. Based on what you can afford, the DMP is put in place to pay back what you owe to the creditor. You collate your debt into a monthly payment and pay back your creditors each month until the debt is paid or you decide to cancel. It’s not a legally binding contract and you can cancel the DMP at any time. However, if you’re falling behind on paying back your debt, it can be a good way to get back on track and is proven to be beneficial for many people.
How does a debt management plan affect car finance?
Car finance on a Debt Management Plan can be harder to obtain because DMP and bad credit usually go hand in hand. When you have a DMP in place, it can mean you have a history of late repayments, missed repayments, and high levels of debt, all of which are causes of a bad credit score. Luckily for you, though, our whole business model has been designed around bad credit applicants and we are one of the UK’s hardest-working bad credit brokers! We work with some of the most trusted UK lenders who have a range of finance packages on offer, and using our expert knowledge, we try to match you with the best finance deal for your situation.
Entering into a Debt Management Plan can also harm your credit because you enter into a new agreement which has smaller payments than you had first promised. This will be recorded on your credit file and can take up to 6 years for it to come off, making it harder to secure finance in the future. However, entering into DMP shows future lenders you are willing to work towards paying off your debt. By meeting the monthly payment on time each month, you can reduce the debt, improve your credit score and regain your financial control.
What is the lowest credit score needed for car finance?
Can I get car finance on Debt Management Plan?
Before we delve into whether you can get a car on finance on a DMP or not, we need to remember that no car finance company can guarantee car finance to everyone who applies. Even if you meet the car finance eligibility criteria, the decision ultimately lies with the finance lender.
You could be able to get approved for Debt Management Plan car finance but there are a few things to consider. If you’re already in a DMP plan, you will usually need to ask permission from your provider. The aim of the DMP is to take steps towards paying off your debts and DMP providers will have to consider whether getting a new car is essential to your life before you take on any more credit. You may be able to justify the necessity for a new car on a Debt Management Plan if you need the car to get to and from a place of work, you live in a remote area with limited access to public transport, you have health or mobility problems, or you’re a carer.
Once you’ve got approval from your DMP provider, it’s time to find a lender! You may struggle to get approved with mainstream lenders, but using a dedicated broker like Refused Car Finance can be helpful. We specifically designed our lending panel around people who have bad credit, no credit, benefit income, DMP, defaults and more! We’ll help you find the best finance package for your situation, and if approved, you will then be able to choose the car you want from any trusted UK dealership!
How to improve your chances of approval:
There are a few considerations you should make before you commit to getting a car on finance with a Debt Management Plan in place.
- Can you afford it? Before you start applying for car financing, you should consider whether you need a car or not. Taking on more credit will increase how much you’re paying each month and can make it harder to pay off your debt. The likelihood is if you’re going to get your dream car whilst on a DMP and you should choose a car which is affordable and realistic.
- What about running costs? Buying a car is one thing but owning a running car is another. One the road, you’ll have to think about refuelling or recharging your car, road tax, servicing and MOT, car insurance and other car costs. Find out what to consider when calculating the running costs of owning a car.
- Do you have a deposit? Whilst all of our car finance deals come with £0 deposit to pay, having a deposit to put towards your car finance to get you approved as it reduces how much you need to pay back to the lender. However, a DMP may have used any spar money you had to pay off your debts so this may not be possible.
- Which type of finance is best? There a few different ways you can buy a car on finance but Hire Purchase deals could be a good option for people with low credit or a DMP in place. Hire Purchase is one of our specialities and it’s widely offered by many lenders. It’s a secured loan which means the lender buys the car on your behalf and you make monthly payments back to the lender. During the agreement, the legal owner of the car is the lender and once all payments have been made, the ownership will transfer to you. This gives the lender extra collateral if you fail to repay.
See how we could help you today!
Get a free quote today with no effect on your credit score. Once you’ve applied one of our fabulous team will be in touch!