How car finance works through Autedia
What is a DMP - Debt Management Plan?
A DMP is an informal arrangement with creditors, usually managed through a licensed debt management company. You’ll likely have dodgy credit in a Debt Management Plan, but can you buy a car on finance with bad credit?
- Appoint a DMP finance company; you won’t have to deal with your creditors.
- You’ll make one monthly payment to your DPM provider, and they will pay your creditors.
- As a DMP is not legally binding, you can cancel anytime.
Alternatively, you could set up a DMP yourself if you feel confident with the help of someone like Step Change, a debt charity.
The advantage of being in a Debt Management Plan is it organises your debts by allowing repayments over a longer term to reduce your monthly outgoings. Most creditors will likely agree to stop interest and charges, but they don’t have to and may still take action against you, such as a CCJ.
Are you considering a DMP or currently in one? Read on to understand your options to keep or buy a car on finance with a DMP.
Why should you choose Autedia for your car finance?
Can I get Car Finance with a DMP?
Yes, you can get bad credit car finance with a DMP, but you’ll need to understand how best to get the loan.
Your DMP conditions may imply that you’ll need to pay off your debt sooner rather than using money to buy a car. Ask your DMP provider. They may require some solid reasons (see below) why you need the vehicle.
Many lenders don’t offer car finance with a DMP because it means you are struggling to pay your debts and, therefore, too risky. You may have already been refused car finance elsewhere. Don’t worry. There are specialist lenders who offer car finance to people in a DMP.
Car Finance Calculator
|Total cost of credit||2,125.46|
Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.
Representative example: borrowing £6,500 over 5 years with a representative APR of 29.9%, an annual interest rate of 29.9% (Fixed) and a deposit of £0.00, the amount payable would be £196.34 per month, with a total cost of credit of £5,280.14 and a total amount payable of £11,780.14.
Am I Eligible for a Debt Management Plan?
To be eligible for a DMP, you need to match the criteria:
- You must be in debt to at least two creditors.
- You need to owe a minimum debt of £2500.
- You’ll need a regular monthly income to set up a DMP.
- A minimum amount of disposable monthly income.
- Your disposable income must be less than your monthly contractual payments.
What debts can I include in a DMP?
Debt Management Plans are only for non-priority debts, such as:
- Credit cards
- Bank loans
- Personal loans
- In-store credit
- Benefit overpayments
Priority debts can’t be in a DPM because the ramifications of not paying them are more severe than other debts. You’ll need to make other arrangements to deal with priority debts before you enter into a DMP.
Does a DMP affect my credit score?
The purpose of a DMP is to help you afford your debts, a crucial part being you pay less than the minimum contractual repayment. Some creditors may mark your credit file indicating you are in a DMP or an arrangement to pay is active. In that case, a DMP will harm your credit history.
Subject to when your DMP starts, any court action, missed payments, or defaults could also affect your credit.
All of these penalties on your credit report remain for six years.
What is the difference between an IVA and a DMP?
An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to assist you in repaying your debts with affordable monthly repayments. The criteria are higher than a DMP. You’ll need to owe at least £6000, the term is fixed, and you are more protected. Your creditors cannot take further action, such as a CCJ.
A Debt Management Plan (DMP) is less formal. You can set one up independently, the debt criteria are less than an IVA, and you can cancel anytime. Protection is minimal if a creditor decides to take out a CCJ. They can.
Can you Keep your Car if you Start a Debt Management Plan?
When creditors enter a DMP, they don’t agree to write off any debt. They expect to get paid in full over a more extended period. That is why as a rule, your vehicle is not part of any arrangement.
However, suppose your car has a decent amount of money in value. You could consider swapping it for a cheaper vehicle and using the cash to pay off some of your debts earlier.
What if you start a DMP and your Vehicle is on Finance?
A car on finance cannot be part of a Debt Management Plan. With a car loan, the finance is secured against the vehicle. You’ll need to keep up with these repayments, or the car finance company could repossess the car.
However, a benefit of starting a DMP is your car payments should be easier to manage. Because you can include the amount, you need to cover the car finance in your living expenses.
There is no reason why the car finance company should discover you are having financial difficulty and about your DMP. Providing you keep paying the car finance, they should not become concerned.
What are acceptable reasons to request Car Finance while in a DPM?
When you start a DMP you may already have a car, want to change your current car or need to purchase a vehicle. These are constructive circumstances you can put forward to your Debt Manangement Plan Provider to secure your vehicle.
- Where do you live? Suppose where you live does not have access to reliable transport routes. You’ll need a car to earn a living, shop and live. A vehicle is deemed a necessity.
- Do you have to travel far for work? You’ll need the means to get to your job, which may mean having a car. If you can’t work, you won’t be able to earn the money required to make payments to your debt management plan. Meaning it’s more likely that your DMP provider will agree to you buying a car.
- Do you have a young family? Are your children school-age? In addition to the commute to work, there is the school run. Significant family life makes your car necessary.
- Do you have any health problems? Maybe you can’t use public transport to travel from A to B. If your health problems restrict your mobility, you’ll need a car.
- Are you a carer? If you care for someone, your duties could be numerous such as shopping, errands, and trips to the doctor with the person. You’ll need a car to carry out your caring task, so your DMP provider will likely accept your request.
How do you pay for Running a Car during a Debt Management Plan?
When you set up a DMP, your first task is to work out your income and living expenses. The amount of disposable income (income minus costs) each month is what dictates how much you’ll pay into the Deby Management Plan.
As your monthly car finance and running cost are part of living expenses, you must include this in your living expenses budget:
- Road tax.
- Service and MOT.
- Fuel and Parking.
- Breakdown cover.