Debt Management Plan Car Finance for Those With Poor Credit Scores
Looking for a new car can be a crazy process, especially when you’ve got personal problems that could potentially stand in the way of you being able to get the car that you want. Poor credit or having no credit at all can have a big impact on your eligibility for car finance, as can a CCJ or an IVA. If you’ve had trouble managing your credit before, it’s possible that you’re now under a debt management plan (DMP), which can sometimes lead to even more roadblocks to the car finance process. Here at ChooseMyCar we aim to provide everyone with the platform they need to get themselves back on the road, no matter whether they have bad credit or not. Below you can find a wealth of information relating to debt management car finance deals, including how to apply for car finance when you have bad credit and how specialist bad credit car finance companies can help you to structure your credit arrangement and payments.
What Is A Debt Management Plan?
A debt management plan is something that will be put in place with a DMP provider in an attempt to help you to regulate and manage your outstanding debts in a more responsible and visible way. Debt management plans are suitable for people who have debts that are seen as ‘non-priority’ – this covers many different types of loans and credit that you might already have such as the following:
- Credit cards or store cards
- Personal loans
- Borrowing from family and friends
- Catalogues, home credit, or in-store credit
Whilst this is great for paying off certain debts, there are others that a debt management plan won’t be able to help you with – these are priority debts like:
- Council tax
- Gas and electricity bills
- Child support and maintenance
- Income tax
- National Insurance
- Mortgage, rent, or loans against your home
- Court fines
- Essential hire purchases
Your debt advisor will structure a DMP that works alongside the amount that you’re earning each month in order to start reducing the amount owed in the most effective way. To do this, you’ll pay a monthly fee to the DMP provider, who then pays money to your creditors for you – this way you will not have to structure payments yourself and you won’t have the chance to spend the money irresponsibly before taking care of your debts first. The payment made to your creditors will be determined by your debt management provider, which will take a look at your incomings and outgoings to ensure that the amount is feasible on a consistent basis.
Who Would Need A Debt Management Plan?
A debt management plan would be useful for people who are struggling to keep on top of their debts and credit accounts. Through the use of a debt management plan, you’ll be able to hand over the responsibility to someone else, relieving a bit of the stress whilst ensuring that regular payments are going to be made to help reduce the amount of debt you have associated with your credit file.
car finance applications in a debt management plan
Debt management plans are a suitable choice for those who have non-priority debts, such as overdrafts and credit cards, as this is the only kind of debt that can be managed using a DMP. If you’re looking to pay off a priority debt – this is things such as mortgages, council tax, or court fines – then you may need to look into a different way of paying.
Having a debt management plan could help you to pay for your bad credit car finance plan too, allowing you to keep up regular payments on your vehicle.
Debt management plans are usually a great option for people who can only afford to pay each of their creditors a small amount each month – often in these scenarios people feel pressured to pay off their most urgent debt, forgetting about their other debts, which means certain creditors are left with no repayment that month. A debt management plan with help you to ensure that all of your creditors are gradually being paid off in smaller chunks; whilst this may be a slower way to pay your payments, it does mean that all of your debts are gradually reducing with a payment plan that is feasible in the long and short term.
A DMP makes it easier to pay off your debts as it takes the confusion and control out of the situation – you simply make one lump payment each month and this is then shared out amongst your creditors to ensure that they each receive some reimbursement every month. Your DMP provider will arrange this with your creditors and will be in charge of determining how much money goes to each creditor each month, meaning you don’t have to worry about calculating that on your own. A debt management plan also offers you the chance to start reducing your debt without taking out more credit, which is a major issue with many of the other debt reduction methods. This many mean that you are in debt for slightly longer as you are paying it back in smaller increments, you will see your debt reduce without first increasing, which will help you to improve your credit score whils reducing your debt.
Who Is Eligible for a DMP?
To be eligible for a debt management plan, you must meet a set criteria first. This is to ensure that only people who need a DMP are given one, allowing others to manage their debt on their own. The criteria is as follows:
- You must be indebted to a minimum of two creditors, if you are in debt with just one creditor it is unlikely that a DMP will be required
- A minimum debt of £2500 – debts lower than this do not require debt management plans.
- It is also vital that you have a regular monthly income when setting up your DMP – your provider will likely arrange a plan based on regular income amounts, but without a regular income it will be incredibly difficult to make an arrangement with your creditors.
- At least £80 disposable income per month – if you do not have at least £80 disposal income per month, it is unlikely that you will be able to maintain regular payments on your DMP without putting yourself in more debt to do so.
- You must also have a disposable income that is less than your contractual payment – if you can afford to pay your debts using your own disposable income, you will not be eligible for a DMP as you have the means to be able to reduce that debt by yourself.
If you meet all of the above criteria, it could be time to look into setting up a debt management plan to help you start reducing your debts, such as your car finance payments, and improving your credit score.
Can You Get Car Finance When Under A Debt Management Plan?
For people who are currently under a DMP, making new purchases can be a difficult task – your DMP provider will likely be very strict when it comes to deciding which purchases are and aren’t necessary, particularly expensive purchases such as a new car! The point of a debt management plan is to control spending and ensure that your outstanding debts are paid, so it is likely that you will have to evidence to your provider that your new car is a necessary purchase, as well as proving that the vehicle is affordable within the budget you have available whilst continuing to make payments to your creditors.
There are, however, no guidelines that prohibit you from being able to buy a car during a DMP, so should you wish to purchase one you will be able to. However, if you are looking to pay for the car using a car finance plan, you will likely have to speak with your DMP provider first to ensure that this is a manageable additional monthly cost.
If your DMP provider is asking you whether the car is a necessity, it’s important to consider the following factors:
- Do you live in a rural area? People in rural areas often find themselves secluded from necessary amenities when they don’t have access to a car or transport. If your home does not have access to reliable transport routes, a car enables you to be able to go shopping, run errands, commute to work, and lead a more convenient life – in these cases a car is deemed a necessity.
- How long is your commute to work? For many people, the daily commute to and from work is perhaps the most use that their car gets, particularly if you’re travelling a long distance to get into work. When you work a considerable distance from your home, it’s vital that you have the means to get there – if you aren’t able to get to work, you won’t be able to earn the money required to make payment to your debt management plan, so it’s likely that your DMP provider will agree to allowing you to buy a car in these circumstances.
- Do you have any children? In addition to the daily work commute, the school run is also a major use for the household vehicle. If you have dependent children, you’ll need to ensure that you have a way to get them to and from school each day, again making your car a necessary possession.
- Do you have any health problems? Any health issues that you may have that impact your ability to get from A to B will be taken into account by your DMP provider when deciding whether a car is something that you need. If your health problems restrict your mobility in any way, your car will be seen as something that you require.
- Are you a carer for the elderly or a vulnerable person? In some situations, you may find yourself caring for a relative who is elderly or otherwise classed as vulnerable. If this is the case, you’ll likely be doing things such as shopping, errands, and trips to the doctors with the person. To do this, you’ll need a vehicle that’s safe and accessible, so your DMP provider will likely deem your request for a new car as a reasonable one, thus accepting it.
If any or all of the above applies to you, you stand a good chance of being allowed to go out and purchase a car during your DMP, so you shouldn’t have to worry about that too much; if you seriously require a car, your request should be granted and you’ll be able to start looking for the safest, most manageable way possible.
Can you afford your car payment?
The first, and most important, thing that you need to consider is whether you can afford to consistently meet your agreed upon payments for your new car for the duration of the contract. When signing up for a finance deal, you’re agreeing to a credit arrangement, which does mean that more debt will appear on your account – this adds to the amount of debt that your DMP will be managing, so you will likely be paying more into your debt management plan as a result.
ChooseMyCar’s Finance Calculator can help you to understand the ins and outs of car finance payments, showcasing exactly what you can afford by entering your budget and performing a credit check.
Are you eligible for car financing?
If you’re currently under a debt management plan, you’re likely to have a lower credit rating – this is because your debt is taken into account when scoring your credit file, with high levels of debt and the presence of a debt management plan or IVA on the file flagging as an issue. Whilst this can make it more difficult to be accepted for a finance deal, it does not make it impossible; there are many specialists such as ChooseMyCar who provide services tailored to people with bad credit, offering bad credit car finance and debt management car finance plans that enable you to get the car you want at a manageable price.
One thing to bear in mind when looking for a car finance deal under a debt management plan is which kind of car finance plans you will be able to apply for. Your DMP will be able to assist you in payments for unsecured loans, however, secured loans cannot be added to your debt management plan. Hire Purchase agreements also cannot be added into a debt management plan – this is due to the clause that states ownership of the vehicle will revert to the dealership in the event of missed payments, which means that there is another alternative to paying this debt back. Debt management plans are in place to help you make regular repayments that are manageable in line with your monthly income that otherwise would simply go unpaid, which is not the case with an HP agreement.
In principle, this again can depend on the factor of necessity; if you have an existing agreement on a car that is deemed necessary, or you require a car in order to work or support vulnerable friends and family members. In these cases, your car will be deemed a necessary expense, therefore allowing you to set up a payment plan for the vehicle and add that into your monthly repayment plan set up by your DMP provider.
Would you benefit from a bad credit car finance deal?
For those with a bad credit score, specialist bad credit car finance deals can be an incredibly useful tool to utilise – ChooseMyCar has a huge history of assisting people in all circumstances to get back on the road, offering payment plans that are safe, secure, and manageable for the applicant. Our 2 step credit check allows us to check all the bases, offering greater protection to both ourselves and the applicant, ensuring that they have the facilities to make regular payments without plunging themselves into dangerous levels of debt. Your DMP provider will also likely get involved with this process to further assure you of whether you’ll be capable of meeting the financial obligations presented.
As part of our credit checks, we’ll run both a soft search and, upon successful completion of that, and a hard search – this allows you to gauge whether you may be successful with your application and the following hard search without it having a negative impact on your score. Hard searches will appear on your credit file, with too many in a short period of time leading to a lower score – soft searches are less thorough and do not appear on your credit file, so having this conducted before you proceed with a formal application is a fantastic way to protect yourself from negative impacts on your account.
Bad credit car finance deals come in a range of different shapes and sizes, allowing us to help people in a variety of different circumstances to take the necessary steps towards getting on the road in a car that’s suitable for their needs. For many, our bad credit car finance packages offer a way to get on the road in a car that’s going to be reliable and durable, rather than having to buy something cheap that may not last as long as you’d need it to. For those who have particular struggles with passing credit checks, we offer guarantor car finance deals – these allow you to get a car finance plan when your credit score isn’t healthy enough to pass the credit check. In these instances, your guarantor will act as a safety net for your lender should you miss payments, meaning that they will be contractually responsible for ensuring that any missed payments are rectified.
What happens if you don’t keep up with your payments?
Unfortunately, there are cases where the payment plan becomes too much – this could be for a variety of reasons including changes in employment or emergencies. In these circumstances, it’s important to know what will happen to your car. If you have not yet completed every payment in your payment plan, ownership of the vehicle will revert to the dealership – this means the car is no longer your possession and you will be notified of the next steps in due course.
How Can You Buy A Car During A Debt Management Plan?
Once you’ve decided that you’re going to get a car, it’s time to start looking at the options available! Due to the DMP in place, you are likely going to be looking for a company who is able to offer bad credit car finance to those who may not be eligible for credit with other lenders. ChooseMyCar offers a simple process with a range of fantastic vehicles to choose from, all with catered plans to help out those with bad credit.
Use our handy online car finance calculator to get a better idea of how much you would be able to spend on your car, then start your application by following our online application process or by contacting our friendly team by phone! You’ll quickly be able to see whether you’ve been accepted for credit, then be able to browse the vehicles that fall within your budget! After that, it’s just a case of setting up the credit agreement and payment plan before you can collect the keys to your new car!
Checking your credit rating has never been easier – there are hundreds of online tools, many of which are free, that can give you a breakdown of your credit score along with a range of tailored tips that can help you to improve that rating. Most credit scores will be based off of Experian, Equifax, or TransUnion scales to decide on a score; each of these uses a slightly different scale that is created using varying metrics, so don’t be worried if your scores from different checks comes back different.
Signing up for a credit referencing tool gives you greater insight into the factors impacting your credit score, both the good and the bad. With this extra information, you’re able to keep on top of any issues, keep improving on your stronger points, and create a healthier and more trustworthy credit file for future credit applications.
A CCJ will not necessarily stop you being able to get car finance, but it can often make it more difficult to find a lender willing to offer you approval. A CCJ is a court-order that is given when you have failed to make payments on a debt that you owe – if handed notice of a CCJ, you should aim to pay off the debt as quickly as possible, or contact the lender in an attempt to work out a more manageable payment plan.
Bad credit car finance providers such as ChooseMyCar are able to provide our applicants with a safe way to apply, using an initial soft search to guage whether you may be approved for credit before being submitted to a hard search.
Applying for bad credit car finance with ChooseMyCar couldn’t be easier – our website makes it quick and easy to get you application started and you’ll receive an instant response from our automated credit checks, allowing you to get a decision in a matter of minutes. Once that’s done, successful applicants can browse our extensive range of vehicles to find the perfect car for their needs. If you’re stuck, don’t be afraid to get in touch with out team – we’re just a phone call away and we’re always on hand to help you with any questions or queries that you might have regarding our cars, our finance options, or anything else!
Declaring bankruptcy will have huge implications on your financial situation, especially when it comes to your eligibility for new credit arrangements. In the case of car finance, there are a few options, but the deciding factor will most likely be whether your vehicle is deemed a necessity by whomever is handling your bankruptcy for you. Being declared bankrupt doesn’t necessarily mean that you can cope without a car; many people their car as a lifeline for both themselves and others, and to take that away could cause unnecessary stress and harm to everyone involved. If you are a carer for the elderly or vulnerable, or have dependent children, your car may be seen as a must-have asset – in these cases you may be able to keep your vehicle or apply for a new one through car finance deals, but only if prior permission has been granted by your bankruptcy handler.
For more information regarding bankruptcy car finance, check out are dedicated section on the topic!
If you’re looking for an exact minimum score required to be granted cat finance, then that isn’t going to happen; car finance applications are a complete, detailed process that focus on a number of variable factors, so no two applications are the same. This means that there will never be a defined ‘credit score’ to aim for.
For example, somebody with perfect credit could apply for a car finance deal on a high-value supercar where payments are likely to be in the thousands per month. Whilst their credit rating may be exceptional, that does not mean that they have the income to be able to afford a car that costs more on a monthly basis than the person earns. In this case, the application would be rejected despite the applicant having perfect credit.
Alternatively, a person with poor or fair credit may apply for a budget car which may have payments costing just a few hundred pounds per month – if the applicant’s disposable income for them month is more than the value of the monthly repayments, the application is likely to be successful despite the lower credit rating. This is because the applicant is more likely to be able to make their repayments.
One of the most important things to bear in mind is that you need to be realistic with your expectations in relation to your finances – if you can’t afford a luxury car, you probably shouldn’t be looking to buy one. Instead, look for cars that comfortably fit in your price range to ensure that the monthly payments remain manageable for the duration of your contract.
As with any credit agreement, car finance deals have huge potential to impact your credit rating both for good or bad. This will be determined by how well, or poorly, you stick to your agreed payments. If you make regular payments in full each month, you are likely to see you credit rating boosted due to the building trust that is being formed, but missed payments will have a negative impact on the score and evidence of this may remain on your file for a period of time. When managed responsibly, car finance deals can act as a fantastic credit boosting method that may enable you to become eligible for more appealing finance deals in the future.