Can I buy a car while I`m on a debt management plan?

A debt management plan can really help people who are struggling with unmanageable debt. By reducing your monthly debt repayments to a manageable level, it can help you to ensure all your outgoings are covered.

However, a debt management plan will also change the way you approach your finances. In general, you won`t be able to make big purchases while your debt problems are ongoing (although there can be exceptions to this).

Bear in mind, however, that debt management is only suitable for people who can`t make even the minimum payments towards their debts. In other words, someone in this situation wouldn`t be able to make any major purchases anyway, whether or not they were on a debt management plan.

Quick guide to debt management

A debt management plan is an informal arrangement in which you`ll repay your debts in smaller amounts (based on how much you can afford each month) over a longer period of time. This will enable you to repay your debts at a pace you can manage, while ensuring that all your other essential expenses are also covered.

Interest and other charges are often frozen on a debt management plan - depending on what is agreed with your lenders - which can prevent your debt from growing.

Debt management plans can be arranged by you on your own, or through a professional debt management company. One advantage of doing it through a debt management company is that they can negotiate with your lenders on your behalf, and they can take care of the month-to-month running of the debt management plan. On the other hand, different debt management organisations may operate in different ways, and some will charge a fee for the help they provide.

Is it possible to make big purchases on a debt management plan?

In short, it`s rare that you`ll be able to make any big purchases while on a debt management plan, other than necessary things that contribute to a reasonable standard of living. After all, you`ll be expected to pay as much as you can afford towards your debts each month - if you`re not doing this, your lenders simply won`t accept the new repayment terms. Basically, if they`re agreeing to let you repay your debt more slowly than you`d originally said you would, they`ll expect you to pay as much as you can on a monthly basis.

So it follows that in general, you won`t be able to buy a car while on a debt management plan. However, if there is a genuine need to do so - if your existing vehicle has broken down beyond repair and your work depends on having a car, for example - your lenders may agree to accept lower payments for a while. That said, your lenders are only likely to agree to this if you buy a car that meets your basic needs, and nothing more.

Also consider that because you will be expected to pay as much as you can afford each month, and because of the impact a debt management plan will have on your credit rating, you may find it difficult to borrow any money for large purchases.

If you`re thinking about entering into a debt management plan, click here or call one of our expert debt advisers on 0800 195 2911.

Tags: debt, debt management, buying a car, guide, car finance

Our initial advice on your best financial solution is free. Fees payable when continuing service is provided. Calls may be recorded for training and quality purposes.