If you are living in rented accommodation you may be concerned about what impact starting a Debt Management Plan (DMP) will have on your home.
How will your landlord react to the fact that you have started a DMP and is there any risk that they will ask you to leave their property? In addition how will being in the Plan affect your ability to move to a different property if you need to?
We explain what the possible consequences of starting the Plan will be on your home and what to expect.
How will your landlord react to your Debt Management Plan?
A DMP is a private agreement between you and your creditors. No-one will be told that you have started the Plan and there is no formal register where your details are held. As such your current landlord will almost certainly not find out and you are under no obligation to tell them.
Given this as long as you maintain your monthly rent payments on time the fact that you have started the agreement with your creditors should have no affect on your rented home at all and you will certainly not be at risk of having to leave.
BMD Tip: If anything the Plan should make it easier for you to afford your rent payments and therefore make your ability to stay in your home more certain. This is because you should have allowed a sufficient amount in your living expenses budget to pay for your rent each month before calculating what you can afford to pay into your Plan.
Do you want help to start a DMP? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
What if you want to move to a new rented property during your DMP?
Although your current property will not be affected by starting a DMP it will have an impact on your ability to move to new rented accommodation in the future.
Despite the fact that the Plan is an informal solution your credit rating will become poor once you start it as late payment and default notices will be registered by your creditors on your credit file. Your credit rating is likely to remain poor for the duration of the agreement.
This will affect your ability to find new private rented accommodation as private landlords tend to use letting agents who will carry out a credit check on you before allowing you to rent the property. As your credit rating is poor you will fail this check.
BMD Tip: There is generally no problem if you are moving to a property owned by your local Council or Housing Association.
Options to overcome the issue of your poor credit rating
A possibly way to overcome the issue of your credit rating is to find a third party who is willing to act as a guarantor for your rent payments. This means they would agree to pay your rent if you are unable to make the payments.
If you are confident that you will be able to pay the rent then your Guarantor will never be in any real financial risk and landlords will generally let you rent their property despite your poor credit rating if you can give them this level of comfort.
Another option is to offer 6 month’s rent in advance although this may be impossible due to your financial situation.
Should you start a Debt Management Plan if you are renting?
One of the main disadvantages of using the DMP solution is that it can take many years to complete as you will have to pay your debt in full. Given this and the fact that you are not a home owner you should also consider the alternative solutions available to you.
If you qualify for an Individual Voluntary Arrangement (IVA) you will normally only have to pay towards your debts for 5 years. This could therefore save you a considerable amount and in the same way as starting a DMP your landlord will not be told.
You should also consider the option of Bankruptcy as with this solution you pay nothing towards your debts unless you can afford to do so and then only for a maximum of 3 years. As such given you are renting and your home is not at risk it can be an ideal option if your disposable income is very low.
Having said that a DMP has far less restrictions compared to these more formal debt solutions and so even if the Plan means that you are repaying your debts for a longer time there may be other reasons why it is a more suitable option for you.
Arrange a call with a DMP Expert
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.