Does a Debt Management Plan (DMP) Affect Renting? Complete Guide
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
If you’re thinking about a Debt Management Plan (DMP) and wondering if it affects renting, you’re in the right place. Over 170,000 people visit our website each month seeking advice on this topic.
In this guide, we’ll cover:
- How a DMP might affect your current tenancy
- The impact of a DMP on finding a new place to rent
- Including rent arrears in a DMP
- The possibility of writing off some debt
- Your rights when a landlord refuses to rent to you because of a DMP
You might worry about what a DMP means for your home and feel unsure about asking for help. You’re not alone! In fact, Citizens Advice found that 60% of adults facing financial difficulties hesitate to seek assistance.1
Don’t worry, this guide aims to answer your questions and give you clear advice.
Can Rent Arrears be Included in a Debt Management Plan?
Unlike most debt solutions available in the UK, a debt management plan is an informal solution. Due to this, the only types of debts that it covers are unsecured debts.
Examples of unsecured debts include credit card debts, personal loans, catalogue debts, etc. Unsecured debts can be defined as debts that have not been “secured” against any valuable asset of yours.
As you can probably tell, your rent arrears do not fall under this category since your rented space is what is secured against this debt.
Thus, your rent arrears cannot be included in your debt management plan.
If you opt for a debt management plan, then you will have to keep making your rent payments separately from your DMP. Your rental payments will be considered to be essential expenses when your DMP’s payment plan is being drafted.
Please note that your rent arrears are considered to be priority debts which means that they are something that you need to attend to first before all forms of unsecured debt.
DMP Comparison
Unlike other debt solutions, a DMP only covers unsecured debts.
To provide a clearer picture of these differences, I’ve put together a table comparing a debt management plan with other available options.
| DMP vs Alternative Solutions | How It Can Help Tackle Debt | Suitable For Individuals… |
|---|---|---|
| Debt Management Plan (DMP) | An informal agreement to pay back non-priority debts in a more manageable way, but does not write off any debt. | …seeking a flexible arrangement without legal proceedings. |
| Debt Relief Order (DRO) | A formal solution that freezes debts for a year, after which they may be written off. | …with a total debt under £20,000, low income, and minimal assets, who cannot afford to pay off their debts. |
| Individual Voluntary Arrangement (IVA) | A formal, legally binding agreement that typically lasts for 5 years and can write off a portion of your debt at the end. Credit rating will be negatively affected. Homeowners can keep their home. | …with a larger amount of debt who can commit to a fixed repayment plan and want to avoid bankruptcy. |
| Bankruptcy | A formal legal process that writes off most debts but has significant consequences, including potentially losing your home and negatively impacting your credit rating and job prospects. | … with significant debts that cannot realistically pay them off. More severe option with substantial consequences. |
| Consolidation Loan | A consolidation loan involves taking out new credit to pay off existing debts. It can simplify payments and potentially reduce interest rates. But, you could also end up paying more interest overall. | .. with multiple debts looking to consolidate into a single payment, usually with a good credit score to obtain favourable terms. |
| Payment Holiday | Payment holidays offer short-term relief by pausing or reducing payments. Payment holidays don’t reduce the total debt amount and are usually for a short duration. | ..with short-term financial difficulties needing temporary relief from debt payments. |
| Equity Release | Equity release involves homeowners releasing equity from their property. It provides a lump sum or additional income by using the home’s value but reduces the property’s equity. | …with debts and want to unlock the value in their home to pay them off, reducing their property’s equity. (Ideally for older homeowners, usually 55+) |
| Informal Negotiation | Informal negotiation is not legally binding and involves negotiating with creditors for better terms. | …with debts and wish to negotiate terms independently and prefer to have a flexible, non-binding arrangement with creditors. |
Will My Current Residential Status be Affected Due to a DMP if I’m Living in a Rented Space?
There’s really no reason why a DMP might affect your living status if you already reside in a rented property.
As mentioned earlier, the payments you make towards your monthly rent are considered to be essential expenses in the eyes of your DMP provider.
This means that when your DMP’s payment plan is being written, some budget is set aside to help you pay your monthly rent payments.
Hence, if you opt for a debt management plan as a debt solution, you’re not going to have any trouble making your rental payments.
That being said, you’re going to have to calculate how much money you have leftover to pay towards your DMP after you’ve made the payment towards your rent.
There’s a possibility the money you have leftover after you’ve attended to your priority payments (including rent) might be so low that your creditors might not accept your DMP.
This is something that you’re going to have to discuss thoroughly with your DMP provider before you present the payment offer to your creditors.
You can also seek debt advice regarding the planning of your debt management plan’s budget from independent debt charities. Some examples of great debt charities currently operating in the UK are Payplan and Stepchange.
If you go to any other advice agency, just make sure that they are authorised and regulated by the Financial Conduct Authority (FCA).
How a debt solution could help
Some debt solutions can:
- Stop nasty calls from creditors
- Freeze interest and charges
- Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
| Monthly income | £2,504 |
| Monthly expenses | £2,345 |
| Total debt | £32,049 |
Monthly debt repayments
| Before | £587 |
| After | £158 |
£429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
The Landlord isn’t Letting Me Rent a Property Because of My DMP. What Should I Do?
If your landlord is being difficult about letting you rent a house due to your DMP, there are a couple of things that you can do.
Firstly, producing a guarantor can be a very effective way of securing a rented space for yourself.
A guarantor is someone with a good credit rating that will step up and pay for your rent if you fail to pay it at some point.
Your guarantor can be anyone such as a parent, family member or close friend.
If your guarantor has a good credit score, the landlord will have some guarantee that even if you’re unable to make your rental payment, your guarantor will be able to do so on your behalf.
Another way of securing a space to rent for yourself is by a larger initial security deposit. You might be required to pay an initial deposit of up to three months’ rent.
This deposit would act as “security” for the landlord in case you are unable to make your payments.
Initial deposits work quite well with most landlords but it’s true that procuring such a large amount of money might be difficult for you since you’re already in a DMP.
» TAKE ACTION NOW: Fill out the short debt form
Can I Find a New Space to Rent?
Yes. While it’s not impossible to find a new space to rent during a DMP, there’s a chance you may run into some difficulties.
This is because the reduced payments you make as part of your debt management plan have a negative impact on your credit rating.
These reduced payments show up within your credit file so, anyone that’s going to look at your credit report will notice that you’re making reduced payments towards your debt.
These reduced payments will have a DMP marker next to them to indicate that the reduced payments are because they are part of a debt management plan.
When you apply to get a new space to rent, the landlord might perform a credit check on you.
While there’s no legal law that states that someone with a DMP can’t rent a property, there’s a chance that you’ll run into difficulties because of the landlords and the credit check they might perform on you.
During this credit check, if they see that you’re in a debt management plan, they might be apprehensive about letting you rent the property.
This is because they will see you as a risk due to your DMP.
They may feel that you might fall behind on your rent payments or might not be able to pay them in full on time due to your DMP.
A DMP will also suggest to the landlord that you are not financially disciplined.
References
