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DROs & DMPs: do they affect your ability to get car finance?

If you’re in a Debt Management Plan (DMP) or have a Debt Relief Order (DRO), you may be wondering whether you can still get car finance.

It’s understandable that you want to find out more before applying, so let’s take a look at how they work and if these two different types of debt affect your ability to get car finance.

What is a DRO?

A DRO is a Debt Relief Order and one way to help people who cannot afford to repay their debts. When you have a DRO in place, it prevents your creditors from chasing you for the debt and after 12 months, if your situation hasn’t changed, your debts will be written off.

Lady

There are only specific circumstances in which you can qualify for a DRO. The main eligibility criteria is that your debt must be low – usually under £20,000 – and you cannot have any assets over £1,000 or own a home. You then qualify if you have less than £50 left each month after paying your household bills and expenses.

The DRO is authorised by an official receiver whose role it is to decide whether you qualify. You also need to have an authorised debt adviser to guide you through the process.

How does a Debt Relief Order affect my credit score?

As you can you imagine, a Debt Relief Order does have a negative impact on your credit score, and it will show up on your credit report. It also stays on your file for up to six years from the date the order was put in place.

Having a DRO can impact your chances of getting credit from some lenders, as it shows a history of struggling to keep up with repayments.

However, from a lender’s point of view, the more time that has passed since the DRO, the better, providing you’ve kept on top of your payments and managed your credit well since.

Can I get car finance with a Debt Relief Order?

If you’re looking for car finance and you’re in a DRO, there are some things you need to be aware of. The first is at what stage are you in your DRO? If you’re within the first 12 months, there are some restrictions that may stop you getting car finance.

During the first year of your DRO, you’re not allowed to take out credit worth more than £500 without first gaining permission from the receiver. You also need to disclose the DRO to the lender.

Contract

On top of this, if your situation changes within those first 12 months, it has to be disclosed and could affect the DRO.

As you only have a disposable monthly income of £50 or less, it would limit your ability to meet car finance payments.

Once the 12 months of the DRO have passed, the order will end. However, it stays on your credit file and will impact the lender’s decision whether to approve your application for car finance.

If you’re eligible, you may have to pay a larger deposit and may only qualify for higher interest deals.

At Hippo Motor Finance, we understand that sometimes life throws you a curveball, which can affect your finances. A car can be essential for work or family, so we’re happy to discuss your circumstances with you. 

With a panel of specialist lenders who deal with customers with poor financial history, we may be able to help. We will only ever use a soft search when seeing if you’re eligible so it won’t impact your credit score.

What is a DMP?

A Debt Management Plan (DMP) is an agreement you make with your creditors to pay back the money you owe them in an affordable way – often with lower payments over a longer period of time.

Although you can arrange a DMP yourself, it’s often easier to use a DMP provider who can deal with all your creditors for you and organise your payments. This way, you can give your provider one monthly lump sum, which they will split between your creditors until all the debt is paid off.

It’s not a legally binding agreement, so you can cancel a DMP at any time.

How does a Debt Management Plan affect my credit score?

A DMP isn’t noted on your credit report, however, your creditors may add a note to your account entries to show that you are on a repayment plan.

Couple looking at bills

If you’ve missed any payments or defaulted on any of the debts in the run up to setting up your DMP, these will have also impacted your score and be visible to lenders. Any defaults will stay on your file for up to six years.

The good news is that a DMP does show you’re willing to repay the debt, so will be more favourable to lenders than some other debt solutions.

Can I get car finance on a Debt Management Plan?

It depends on the terms of your DMP, as some may state you can’t borrow more money until the plan is finished.

However, car finance is often looked at as an essential, particularly when you need the car for work, so it’s worth checking with your provider.

It’s worth noting, though, your debt will have probably affected your credit score, meaning if you do qualify for car finance, you may be limited by high deposit amounts and high interest rates.

If you’re looking for car finance while in a DMP, you should always make sure it’s affordable for you to prevent struggling further financially.

How Hippo Motor Finance can help if you’re in a DMP or have a DRO

We recognise that sometimes your financial circumstances change, but your need to access a car can be still just as important.

Lady in new car

We know that those in a DMP or DRO are taking the steps to tackle their financial problems, so ensure that we only ever carry out a soft credit check to find out whether you could be eligible without impacting your credit score.

Our specialist panel of lenders are experienced in looking at those with poor credit history and we’ll always try and help customers who have difficulty accessing car finance elsewhere or who need advice.

To find out if you’re eligible for car finance without it affecting your credit rating, try our free soft credit search here.

Representative Example of Credit

We expect more than 51% of our customers to achieve this rate.

Loan Amount Total Cost of Credit Representative APR 60 Monthly Payments Deposit Amount Loan Term Total Amount Payable
£7,500 £3831 19.1% APR £188.85 £0 60 Months £11,331

All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future. All prices correct at time of publication.

We purchase a wide variety of vehicles from all over the country to ensure the best quality and value for our customers, all of our cars go through a thorough inspection process and if they do not meet our standards we do not sell them. We endeavour to inform our customers (where possible) the provenance of the vehicle they are buying and as such we will always inform you if the vehicle has previously been either an ex fleet or hire car. Should your vehicle be an ex hire/fleet car please do not be concerned as we would never value this vehicle differently when you come to part exchange it and there is no difference to the CAP valuation either.

You should try and estimate the distance you will travel as accurately as possible to try and avoid excess mileage charges at the end of your contract.

All pictures and/or photos and car descriptions on this site are for illustration and reference purposes only and are not necessarily the vehicle on offer. All offers are subject to change at any time and are subject to finance approval and vehicle availability. All prices correct at time of publication. E & OE.

Hippo Vehicle Solutions t/a ‘Hippo Motor Finance’ is authorised and regulated by the Financial Conduct Authority. FRN 658076. We are a Credit Broker not a Lender and can introduce you to a limited number of lenders. We typically receive a fixed commission calculated by reference to the vehicle model, product or amount you borrow, for introducing you to a lender but this does not affect the interest charged on the agreement, all of which are set by the lender. All offers are subject to change at any time and are subject to finance approval.

We endeavour to ensure that all information including the specifications and finance availability are accurate. Whilst we make every effort to display correct information we are aware that errors may occur occasionally. We are not able, therefore, to guarantee the accuracy of all information especially when given to us by third parties. If you do require clarification of some information you have seen on our website, please email us at info@hippomotorgroup.com . This does not affect your statutory rights.

We are a broker not a lender and our registered office is Unit 26 Trident Park, Trident Way, Blackburn, BB13NU.