When you are in a debt management plan you may find it very difficult to obtain any new loans or any sort of credit, even if you are keeping up with the repayments. This can particularly be the case when applying to high street banks and building societies. Fortunately there are plenty of competitive loan plans available for people in a debt management plan, with defaults on their credit file or for those having a low credit score - the difficult part is finding out who they are and how they go about the business of funding their loans for people in debt management.
Many of our clients had already been refused a loan elsewhere or let down by their bank, even when they had a good reason for the loan and knew that they could afford it. This can simply be because many lenders rely on your credit score to decide whether to loan you the money, or not. Our lenders plans work differently. Their focus is to make sure the loan is putting you in a better place, that you can afford the repayments and that you meet their lending criteria. To find out how our lenders could help you please call the UK debt help loan team for free on 0800 0159108 or complete our fast quote on line enquiry form and we will get to work on your specific case.
If you`ve reached the point where you`re going out to work just to be able to pay the bills and you can`t see an end to it, then you`ve probably thought about or now entered a debt management plan. There are some positives to this. For example a debt management plan can often reduce your monthly expenditure to an affordable level so you can start to keep on top of your general finances.
There is a problem here though and it tends to rear its head when you want to move on and either settle the plan with a new loan, have a new borrowing need or a combination of the two. After all once you start to live your life again it`s not long before you require a new sofa, kitchen, bathroom or need more space, etc, etc. The trouble is that all of this costs money and if you`re in a situation where you`re still paying old credit off there probably aren`t many companies out there queuing up to lend you money.
This is because when in a debt management plan you are not meeting the original credit agreement terms with those lenders and are therefore not usually meeting the minimum payments on them. Your credit record will show each under payment as a missed payment until after 4 or 5 months when it will normally show as a default. Unfortunately these` defaults` remain on your credit report for around 6 years, even if you satisfy them. Other lenders can see defaults when you apply for credit cards / loans and of course they have a big impact on lowering your credit score. This is why many lenders automated systems will simply decline your loan application without further investigation.
The issue that many of us have with revolving credit (such as credit and store cards) is that we can just make a minimum monthly repayment on them and keep growing the total debt. As it seems easy to keep the monthly repayments low, it`s not too much trouble to rack up debt on another credit card or catalogue until you find your disposable income is all being used to make only the basic payments and you aren`t able to reduce your balances.
Of course the best way to avoid this is not take out too much credit out in the first place and only borrow what you know that you`ll be able to repay easily…. Nice idea as that is, those of us who occasionally have unexpected expenses (or loss of income) and don`t have access to a crystal ball, need a solution that can be used without the benefit of second sight.
So try to spot as early as you can when you`re starting to struggle and do something about it. It`s at this point that you might want to call My Sort of Loan and talk to one of our qualified UK loan advisers. At this early stage you may be able to avoid entering debt management and could arrange a consolidation loan before you start to lose your ability to stay on top of your repayments. If things have gone a bit beyond this stage we may still be able to help but the interest rate might well have started to climb.
It is useful to know that if your creditors know that you are struggling and you can make an offer in full and final settlement of your debt plan, it can often be the case that they will consider a lower settlement figure to close down your debt account. Of course this decision can be made easier if they know that the money will come through to them in short order and their only alternative is years and years of accepting reduced payments from you via a debt management company.
So is debt management always a bad thing then? Certainly it isn`t, there are many instances where debt management is a perfectly viable and sometimes superior solution to a debt consolidation loan. We specialise in and give advice on secured homeowner loans or second mortgages. These are for people who own property, whether they live in it or not. If you are not a homeowner / mortgage payer (i.e. a tenant or living with parents) we may be able to refer you to someone else who can help.
The reality is it can be tricky to know when either solution is most appropriate and the best way to determine this may be to talk to our qualified loan advisers to find out which options you have via our lender panel. Here are a few pro`s and con`s to consider when looking at looking at debt management or debt consolidation loans.
Interest - With most debt management plans interest can be frozen and you pay the whole debt down as capital. Interest is always payable on a homeowner loan.
Credit Score - A debt management plan can have serious consequences for your credit rating. A homeowner secured loan if paid on time can enhance your credit rating allowing you to borrow at better rates in the future.
End Date - Both a debt management plan and a second mortgage will put a firm end date on any revolving credit, depending on how much you can afford to pay. So either way at least your repayments will stop.
Debt Reduction - If you are taking out a loan to clear the DM plan you may be able to negotiate a short settlement whereas with a debt management plan you will have to pay the entire debt.
Security - Whilst a debt management plan if not met can lead to defaults and county court judgements by lenders trying to recoup their losses, a secured homeowner loan / second mortgage carries the same risks as a mortgage and therefore your home may be repossessed if you do not keep up repayments on your mortgage.
If you`re already in a debt management plan and you need to borrow again, all is not lost, My Sort of Loan still try to help. Sometimes, when your debt management plan has been run well for a while and you have a surplus income it can make sense to use a secured loan to fund your borrowing requirements. This can sometimes be done without disturbing your debt management plan which can be especially useful if your interest has been frozen.