How to Get a Debt Management Plan While Renting

I’ve been asked several different questions about using Debt Management Plan and renting a home. It’s smart to ask these types of questions before you agree to any debt solution because you need to know exactly what will or can happen.

In this new post, I’ll be covering Debt Management Plans and renting from different angles. And I’ll even reveal a way you could make renting a new property with a DMP easier. Let’s waste no time.

How does a Debt Management Plan work?

A Debt Management Plan is an informal debt solution between you and applicable creditors for you to make one monthly payment that gets proportionally divided amongst them. This continues until the debts are all repaid.

The monthly repayment is calculated based on how much disposable income you have each month after you pay for essential expenses like rent, groceries and bills. The greater amount of your disposable income you offer to pay into the DMP, the more likely that creditors will accept your proposal.

Some Debt Management Plan agreements also include interest and all charges frozen to help you pay off the debts quicker. But creditors aren’t obligated to agree to this or the DMP at all. They are encouraged to listen to offers and your situation. Sometimes a DMP is also the best option for the creditor to get its money back eventually.

A Debt Management Plan is considered an informal debt solution because it holds no legal weight. Even if you or creditors agree to the repayment plan, either party can pull out of the DMP at any point. This is not the same with other debt solutions, such as an IVA.

Do you have to pay?

There are ways to have debt written off in the UK.

If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need.

If you want to find out whether you qualify for having debt written off or payments lowered then fill out the short form below.

What debts can be included in a DMP?

Only unsecured non-priority debts can be included in a Debt Management Plan, such as unsecured personal loans, store card debts and credit cards.

You won’t be able to include any debts that are secured against property, such as a mortgage or any other type of secured loan.

Can rent arrears be included in a DMP?

Rent arrears cannot be included in a Debt Management Plan. These arrears are considered priority debts and must be repaid outside of the DMP.

What are the positives of a Debt Management Plan?

The main positives when using a Debt Management Plan are:

You agree to a repayment structure that is deemed affordable to you while maintaining essential costs.

You might have any interest on the debt frozen to help you pay debts back quicker.

DMPs are free to set up and debt charities can negotiate on your behalf as well.

Can you lower your repayments?

If you’re struggling to pay back your debt, then you might qualify for a debt solution.

Some solutions lower your monthly payments while others write off a portion of your debt.

To find out whether they could work in your situation, hit the button below.

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What are the negatives of a Debt Management Plan?

The drawbacks of using a Debt Management Plan are:

They are not legally binding so creditors can exit the agreement and chase you for full payment.

Creditors aren’t obligated to agree and some debts, such as rent arrears and secured loans, cannot be included.

DMPs will harm your credit score, although this could do lesser damage than not using any debt solution and creating bigger arrears and debts.

What happens if you go on Debt Management Plan?

When you agree upon a Debt Management Plan you will start making monthly payments into the DMP.

The DMP won’t be recorded on any public insolvency register because it isn’t classified as a formal debt solution. Thus, nobody will be able to check a register to see if you’re using a DMP.

However, as mentioned above, the DMP will have an effect on your credit file. Creditors will mark your file to state that you’re making partial repayments which are lower than what was originally agreed.

How long does a Debt Management Plan affect your credit rating?

Records added to your credit file last for six years before they’re automatically removed. Therefore, each of your partial repayments made within the DMP will stay on record for a further six years.

The longer these records remain on your credit file the less effect they should have. But this really depends on how you’re managing your wider personal finances and debts.

Can I rent with Debt Management Plan?

There aren’t any laws to say you cannot rent a property while using a Debt Management Plan to get out of debt.

But things may not be this straightforward and it depends on the exact circumstances. Lots of people have asked this question online, so you’re certainly not alone in wondering this. See here:

Source: https://forums.moneysavingexpert.com/discussion/5576490/can-i-rent-while-on-a-debt-management-plan

The answer may change whether you’re referring to a property you currently rent, or whether you’re talking about moving to a new rental. I’ve covered these scenarios separately below.

Does a Debt Management Plan affect your current rental?

Using a Debt Management Plan to get out of debt probably won’t affect your current rental.

This is as long as your rent payments – or any rent arrear repayments – have been accurately factored into your disposable income, which they will be if you have used a debt charity to negotiate on your behalf.

There is no way for the landlord to check if you’re using a DMP so won’t know that you are. The only exception would be if the rental agreement states that you have to inform them if you’re using a DMP, which is rare to unheard of.

Does a Debt Management Plan affect getting a new rental?

Although there is nothing legally stopping you from renting a new property while already using a Debt Management Plan, there could be some hurdles that stop you from getting the new rental.

These are:

A credit check
The DMP agreement

First of all, most landlords and estate agencies will complete credit checks on rental applicants to make sure they’re likely to pay the rent on time. These checks include but aren’t limited to previous references and a credit check.

If they see that you’ve got multiple partial repayments on your credit file, they may know this to be a Debt Management Plan and be reluctant to offer you the rental agreement. But this comes down to the estate agent or landlord’s preferences. There is a way to overcome this sometimes, which I’ll come back to in the section below.

The other thing that might stop you from getting a new rental with an existing Debt Management Plan is the terms of your agreement. If you’re currently renting a cheaper home or paying less to live with friends and family, you may not have the disposable income to pay the higher rent and keep up with your Debt Management Plan repayments in full.

Of course, you could exit the DMP and choose to spend more of your money on the higher rent, but this would open the door for creditors to chase you for full payments and even take legal action that can result in the use of bailiffs.

How to get a new rental with a Debt Management Plan

If you’re worried that your credit score will stop you from getting approved for a new rental, there may be some workarounds.

One of the most popular is to use a guarantor within the rental agreement. This is when a friend or family member becomes responsible for paying your rent if you miss a payment.

This can give estate agencies and landlords the confidence to offer you the rental agreement despite the DMP.

Can you get a mortgage with a Debt Management Plan?

A Debt Management Plan will negatively affect your credit score and your borrowing power when it comes to applying for a mortgage. But it’s still possible to get approved for a mortgage while you’re using a Debt Management Plan.

Debt Management Plan and renting summary

A Debt Management Plan is highly unlikely to affect your ability to keep renting your home, but you will need to keep up with rent payments outside of the DMP.

There can be issues when trying to rent a new property with an existing DMP due to the likely credit check, or if the new rental payments will prevent you from making full DMP payments.