A debt management plan (DMP) can have little or significant impact on your life. This article answers the question: How does a debt management plan affect me? And will explain how having a debt management plan can affect you and your partner or spouse.
Can I have a Mortgage?
It is possible to get a mortgage and any other form of finance whilst in a DMP. The decision of whether debt management is better than consolidation is really down to affordability and availability.
It is possible to get a mortgage. It would probably have to be a subprime lender and you probably would have to have a considerable deposit. Most debt management companies have a friendly mortgage advisor. If you are paying a high rent payment and you could prove to a lender the affordability of an equivalent or lower mortgage payment it would make sense to try to get one.
Please note, there is also nothing stopping you from have a debt management plan whilst having a joint mortgage.
Will a debt management plan affect my spouse?
The short answer is no. Your spouse’s income will be taken into account only as a joint payer of household and other joint bills and debts. This will then show how much of your income is available, after bills, to be realistically used towards the DMP. Other than this, your spouse should not be affected by a DMP.
If you jointly own a property with your spouse or partner there may be situations where a DMP may affect your ability to sell the property. Your partner may have charges, restrictions placed on the property in their name, against their share of the property. These should not prevent the sale of the property just the order of who receives notice of the sale, or money from the sale. Although in most cases there should be no reason why you can’t sell your home under a DMP.
Similarly to this, your spouse’s credit rating will only be affected if you have any joint bills or have linked credit in any way. If they were to apply in the future for credit you may be shown as connected to them on the credit report.
Can I rent a property while on a DMP?
We do not foresee any reason why you cannot find a property to rent. However, you will need to make your DMP provider aware that your circumstances have changed. Also if you feel that you are not in a position to raise the full deposit required to rent a property your council may be able to assist through a rent deposit, bond or guarantee scheme.
A private landlord may also do credit checks and will have their own ideas about what is, or is not acceptable, to them when letting a property. If you are currently using a fee-charging debt management provider then switching over to a free provider may enable you to clear debts faster, or allow more flexibility in your budget whilst changing property.
You can check your file to see what is visible when a credit search takes place.
How does a debt management plan affect my credit ratings?
If one of your creditors makes a note on your file today about the status of your account then it will be visible for the next 6 years and then will not show any more. Credit reference agency files are 6 years long. As we move forward in time entries that are older than 6 years are no longer on your file. An entry remains on your file unless it is proven to be incorrect and subsequently removed. If your plan ends and your creditor’s mark on your file that is was settled in part this will be visible for 6 years.
You do not necessarily have a bad credit rating, you have information on your file that some lenders will find unacceptable when making the decision on whether to allow you their credit facility. For another lender, this information may be of no interest at all and might not affect their decision to lend. Overall it would be safe to say that choices and rates may be restrictive in the first couple of years after a plan has ended and you start to rebuild your credit rating.
Can I take out a loan or car finance while on a DMP?
It is unlikely that the provider of your DMP will allow you to take out extra finance whilst working with them as this goes against the aim of managing your debts to a point where they are paid off.
Please note, loan applications that are not credit scored (i.e. student loans) will not be affected by a DMP. However, your DMP provider may not be happy for you to be taking out further borrowing.
Will a DMP affect my job?
There isn’t anything in the law that means you cannot get a job with a DMP or if you need to declare it to your employer. The answer that you are looking for is more likely to be with your employer or the HR department at the company.