Car and a Debt Management Plan
One of the worries that you may have about starting a Debt Management Plan (DMP) is the affect that it will have on your car. This is quite normal. If you were to lose your car or any other vehicle you use such as a motorbike you might struggle to get to work or with family transportation. The good news is that you will almost certainly be able to keep your vehicle. Your creditors will generally not be interested in it and you are allowed to include the reasonable costs of running it in your living expenses.
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Is there any risk to your Car if you start a Debt Management Plan?
Creditors are generally not concerned about your car if you start a Debt management Plan. You will need to include the costs of running the car in your living expenses budget. However as long as these fall within the creditors expenses guidelines there should be no issue.
The reason for this is that you still have to repay all of the debt you owe. Your creditors are not obliged to write any debt off for you during your Plan. The cost of running your car will just mean that your surplus income is reduced and so it will take you longer to pay your debt.
DM4U Tip: The value of your car will not normally be considered. Nevertheless if your car is extremely valuable you might want to think about selling it and buying a cheaper one. There is no legal obligation to do so. However if you do you could use any cash left over to settle some of your debts which will mean that you complete your Plan more quickly.
How will Car on HP be affected by a Debt Management Plan?
If you are currently paying for a car on finance or an HP agreement then starting a Plan should not affect this. You can include a suitable amount to cover your car finance payments in your living expenses budget.
The car finance company you are using will not find out that you are in a Debt Management Plan because the agreement is informal and totally private. As such there is no risk that they will become concerned and try to repossess your vehicle. The only time that would happen is if you do not maintain the agreed finance payments.
What if your Car Finance Agreement finished during your Plan?
If you are paying for your car with an HP agreement and this comes to an end the car is then yours to keep. If you are in a Debt Management Plan you can then decide what to do with the money you are now saving each month. You are not obliged to pay this extra money into your Plan. However it might be a good idea to do so as this will mean that your debts will be paid faster. Alternatively you can chose to save this extra money and put it towards a lump sum fund for settling your debts early.
If your car is on a lease agreement which comes to an end during your Plan you might have the option to buy the car outright if you can afford to pay a lump sum. However if you cannot raise the required cash you might have to consider taking out a new lease agreement.
DM4U Tip: Taking out a new car lease will be more difficult while you are in a Debt Management Plan. This is because your credit rating will be poor. It will mean that you may not be able to get a new agreement with the same finance company. There are specialist finance companies who will lend to you even though you have a poor credit rating. However the finance and therefore the monthly payments will be more expensive than what you are used to.
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