A debt management plan (DMP) is an informal agreement to repay your debts at an affordable rate. Taking out car finance while you’re on one is possible with some lenders, but it can put your plan at risk. This guide explains what to consider and how lenders see DMPs.
In short
You may be able to get car finance while on a DMP, but most mainstream lenders will decline, and new credit can upset your creditors and your plan. Talk to your DMP provider first. If you do apply, specialist lenders are more likely to consider you, usually at higher rates. Your chances improve once the DMP is completed.
What is a debt management plan?
A DMP is an informal arrangement where you make one affordable monthly payment, usually through a provider such as StepChange or PayPlan, which is shared between your creditors. Unlike an IVA or bankruptcy, it isn’t legally binding.
How a DMP affects your credit file
- Accounts in a DMP are often marked with an arrangement to pay, which shows you’re paying less than agreed.
- Some creditors also record defaults, which stay on your file for six years from the default date.
- Once you’ve repaid the debts, accounts are marked as settled or satisfied.
Can you get car finance while on a DMP?
It can be possible, but think carefully:
- Your creditors may object. They’ve agreed to accept reduced payments because you can’t afford more. Taking on new credit can lead them to withdraw from the plan.
- Your provider may advise against it. Most DMP providers recommend not taking on new credit during the plan.
- Lenders will see the DMP. Most mainstream lenders decline. Some specialist lenders may consider it if the finance is affordable alongside your DMP payments.
If you need a car, for example to keep a job, speak to your DMP provider first. They can help you work out whether it’s affordable and how to approach your creditors.
Important
New car finance that stretches your budget could make it harder to keep up your DMP payments. Missing payments on either would make things worse. Only borrow if it’s clearly affordable.
Car finance after your DMP ends
Once your DMP is complete, your accounts should show as settled. Defaults and arrangement-to-pay markers will still show until they drop off, but a completed plan followed by on-time payments looks much better to lenders.
To improve your chances afterwards:
- Check your credit files to make sure the accounts are updated.
- Register on the electoral roll.
- Save a deposit.
- Use eligibility checkers with soft searches before applying.
Alternatives to consider
- Keep your current car for longer if it’s reliable.
- Buy a cheaper car with savings, if you have any outside the plan.
- Ask your DMP provider for a budget review.
See bad credit car finance for more.
DMP car finance FAQs
Will getting car finance break my DMP?
Not automatically, because a DMP isn’t legally binding. But your creditors could withdraw from the plan if you take on new credit, and your provider may advise against it.
Do I have to tell the lender I’m on a DMP?
Answer every application question honestly. The DMP will usually be visible on your credit file anyway.
Is a DMP better or worse than an IVA for getting car finance?
During an IVA, you usually need your supervisor’s permission to borrow over a set limit, often £500. A DMP has no formal limit, but lenders and creditors still see it. After either ends, your chances improve over time. See car finance with an IVA.
How long after a DMP can I get car finance?
There’s no fixed rule. Some lenders consider applicants soon after a DMP ends, especially if the defaults are a few years old.