Car finance with a bad history can be difficult to manage. However, you can get decent deals if you know just where to look for them.

To make it easier for you, I have compiled an article that explains how you can get car finance with a debt management plan. 


Let’s get right to it.

Debt Management Plan

A debt management plan (DMP) is a debt solution which allows you to pay multiple creditors at a rate you can afford. You can avoid the high street rates as your DMP provider will talk directly to your creditors.

Your DMP provider should be an insolvency practitioner who is authorised and regulated by the Financial Conduct Authority. He will negotiate the total amount payable and the monthly payments with your creditors.

You will have to make monthly DMP payments to your practitioner who will then give each creditor their due monthly share. In this way, you also get to avoid dealing with your creditors directly.

This repayment plan is a good option for people with a poor credit history. This is because you won’t have to negotiate directly with your lenders. The negotiator would be working in a registered office so you can be sure that he’ll do his job.

However, keep in mind that you cannot use a debt management plan (DMP) to pay off priority debts. You can only use it to pay off non-priority debts such as credit cards and store cards.

Car Finance DMP

Some debts cannot be included in your debt management plan. These include car loans or car financing. And for people coming out of a debt management plan, it is even harder to get a decent car finance deal.

This is because a DMP stays on your credit profile and has an impact on your credit score. People with bad credit have a hard time getting car finance. The car finance company looks at your credit score and decides whether or not to give you the loan.

There are some companies that specialize in providing car finance for people with a bad credit rating. Red Potato is such a company registered in England. They are authorised and regulated by the Financial conduct Authority. 

Companies like this look for a suitable car and a financing deal for you. Then they connect you to the client and get you the possession of the vehicle on credit. Basically, the company talks to the lenders and convinces them to give you a debt to finance your new car.

Red Potato also provides hire purchase agreements, even if you have got a bad credit score. 

This means that it is not entirely impossible to get a decent vehicle even if you have a debt management plan on your credit history.

Credit car finance is otherwise pretty difficult to get for people in a debt management plan as it is harder for people with bad credit history to get a loan.

What To Do In A DMP

In a DMP, make sure that you are getting the best service that you can. Work out the amount you can afford and get a debt management service according to that. 

Additionally, make sure not to take any step without being absolutely sure. This is why it is important to seek debt advice from an expert before finalizing decisions.

Professional help is necessary since there are a lot of options you can go for. While communicating with an expert, make sure that you are completely transparent with your insolvency practitioner and try not to hide anything from them.

Convey the amount you can pay easily every month. They can also negotiate the total amount of the debt. If you have a good DMP provider, he can reduce the amount on your debt significantly and probably your monthly payments too.

For people with multiple lenders, getting a debt management plan is a good idea as they won’t have to deal with the hassle of making payments to every creditor each month one by one. 

The DMP provider will also negotiate the total amount payable and can reduce the amount on credit. They can also negotiate the interest rate payments and can bring the total damages down for you.

user site debt management plan

Disadvantages Of A Debt Management Plan

While a debt management plan is a good option to consider when you have to pay your loans, it also has some disadvantages. 

One disadvantage is that although it reduces your monthly payment, the period of time over which those payments are to be made is increased. This means that you will have to spend much more time clearing your dues than before.

Also, since you are still in credit, interest will continually be charged on your debt. The interest rate will also probably be higher than before since a debt management plan is pretty much a breach of the contractual agreement related to your debts. 

Along with that, the debt management plan also appears on your credit file and will stay there for 6 years. You will also not be allowed to take any additional debts. 

This is where Red Potato comes in handy because it can probably get you the car finance plan that you can afford.

Frequently Asked Questions (FAQs)

Can You Get Credit On A Debt Management Plan?

Yes, you can get credit, but it will be harder for you to do so. Also, the interest rate of the credit will also be higher than before since you will have a bad credit rating because of the plan.`

Can You Get Car Finance On An IVA?

It is possible for you to get a car finance deal while on an IVA but it will be difficult to find lenders willing to give you a loan. However, the final decision will be made after seeing your individual circumstances and your actual ability to make the scheduled payments.

What Happens When You Cancel Your Debt Management Plan?

If you stop making payments to your plan, you will be dropped out of the program and your rates will shoot back up. This means that you will have to follow the previous conditions of your debt.

Some providers will kick you after one missed payment while others are generous enough to allow up to three missed payments.

Finally

Getting car finance is difficult with a debt management plan as lenders look at your history before giving you a loan this big.

However, it’s not impossible so do contact a professional in time to learn more about your options in order to get the dream car finance deal that you want.

I hope this post was helpful. If you have any additional questions, feel free to drop me an email. I’d be happy to help.

Good luck!

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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