Those who are currently using a debt management plan – or looking to start one – will be wondering whether or not they will be able to get a new mortgage.
A debt management plan, which is an agreement with your creditors to significantly reduce the amount you pay towards your debts each month so that you can afford them, is often the option chose by those in serious debt.
The agreement with your creditors is not legally bound as it can be changed at any time to suit your situation.
A debt management plan is an agreement with your creditors to reduce the amounts you pay towards your debts each month so that they fit the budget that you can afford.
Despite its informal nature, simply entering into a debt management plan will have some repercussions in terms of your credit rating and your ability to borrow money. This means that it may be difficult to obtain a new mortgage, though it is by no means impossible.
Due to the current financial situation of the UK economy most banks have tight restrictions on who they lend money too. Those with high incomes, a good credit rating and larger deposits will find it much easier to secure a mortgage than those without. Unfortunately, most people in a debt management plan have a poor credit rating and low levels of saving which will make it incredibly difficult to persuade a bank to lend them money.
Although difficult it is not impossible to get a mortgage while on a Debt Management Plan provided you can persuade the bank that you are no longer a risk to lend money to by:
- Improving your credit rating.
- Making payments to your creditors on time.
- Living within your means.