Car Finance in a DMP

June 30, 2020 - 4 minutes read

Those who have been in — or currently are in — a Debt Management Plan (DMP) are unlikely to qualify for high street rates due to their impaired credit rating, often leaving with them with only 50% + APR options.

Lenders like Premium Plan take a different approach, knowing that securing car finance can be essential for many people, especially circumstances where a vehicle is essential for work.

*Premium Plan’s rates start from 19.9%*

Specialising in providing finance for customers who have difficulty accessing it elsewhere allows car finance to be accessed by customers in a DMP if other criteria, such as affordability, are met. We recognise that applicants who have sought a DMP are tackling their financial problems, and working towards a better financial future.

A soft credit check, like the one we carry out during the application process, won’t impact a credit score and can give a guideline as to chances of approval for car finance. This is especially useful for those who have been in a DMP that might already have credit issues.  Hard credit checks usually leave a mark on credit reports, and multiple hard credit checks in a short period of time can impact the report — whereas soft credit checks don’t leave a footprint.

If you have a client in a DMP that needs car finance, get in touch about referring to Premium Plan.

What is a DMP?

A Debt Management Plan (DMP) is an informal agreement between an individual and their creditors to help manage debt when the person is struggling to meet their repayment requirements. A DMP isn’t legally binding and is designed to help the borrower manage repayments at a more sustainable amount. Lenders can choose to freeze interest on the loans when a borrower enters a DMP, but this is done at their discretion.

How do DMP’s work?

Debt Management Plans are negotiated by a third-party and allow a person struggling with debt to find a more sustainable repayment plan over an agreed period with the agreement of the creditors.

Monthly repayments are calculated based on the individual’s income and expenditure, using surplus income to repay the debt owed. The debtor will need to provide proof to support their budget proposal, such as bank statements and wage slips. The DMP provider will collect a monthly payment from the debtor and distribute the payment amongst the creditors accordingly.

How does a DMP impact credit?

A DMP is an informal arrangement, and as such wouldn’t be recorded on a credit report.  However any credit issues leading up to a DMP – such as missed payments — would be recorded. This would most likely cause a drop in the debtors’ credit score which could impact future credit applications, but as a DMP isn’t officially recorded, it shouldn’t harm the debtors credit health further.

With regular repayments towards the debt and eventual full repayment, the person’s credit score should begin to repair over time if responsible borrowing is maintained.

Representative Example:
Borrowing £5,500 over 48 months with a representative APR of 19.9%, the amount payable would be £162.34 a month, option to purchase fee £10.00, with a total cost of credit of £2,302.32 and a total amount payable of £7,802.32