Taking out a loan during a debt management plan (DMP) (2024)

FAQs

Taking out a loan during a debt management plan (DMP)? ›

Getting a loan or mortgage while on a DMP is possible, though not always advisable. The longer you are successfully paying down your debt, the better the chance your credit score improves and with it, terms for a new loan or mortgage. However, if you're trying to buy a house, you'll need a down payment.

A debt management plan affects your credit file. Most mainstream banks and lenders will be reluctant to lend to you once they see your credit file and they know you are on a debt management plan. The plan works by you making reduced payments, so defaults will appear on your credit file.

As stated by the National Credit Act (NCA), should a bank or creditor approve a loan application from a debt review candidate, they are guilty of reckless lending. The NCA states no one under debt review is eligible for further loans until they have completed the debt review process and are no longer over-indebted.

Yes, a personal loan for debt consolidation may be able to help you pay off your credit cards while saving on interest. You may also be able to borrow money in the form of a balance transfer card.

Sometimes a creditor will refuse to deal with a DMP provider. This could be because the creditor doesn't want to accept the reduced payments or sometimes it could be because they've objected to you using a fee-charging provider, which would mean there's less money to pay the debts you have with them.

What is the maximum amount of debt suitable for a DMP? There isn't a fixed maximum debt level for a DMP. What's more important is whether the plan can help the debtor manage and clear their debts in a reasonable amount of time.

If you're in a DMP, it's normally not a good idea to take on any more debt, such as an overdraft or credit card. If you feel that you need to take on more debt, for example if you've had some unexpected costs such as urgent repairs to your home, talk to your DMP provider first.

No. You cannot and may not apply for any further credit while under Debt Review. This means you cannot use your overdraft, credit cards, retail accounts or any other type of debt. If you apply for further credit while under Debt Review, your application will be cancelled.

You will not be able to get any credit while you're under debt review. The National Credit Act (NCA) has prevented consumers from accumulating more debt while being under debt review as this would hinder the debt review process. You must avoid accumulating more debt while you're under debt review.

34 of 2005, an order for debt review given by the National Consumer Tribunal or the Court, the credit information must be retained by credit bureaus from the date of commencement of the event until a clearance certificate is issued. This implies that credit scoring is not possible for people under debt review.

What is a hardship loan? ›

A hardship loan is a loan to cover an unexpected financial shortfall, either because your expenses went up or your income went down. Hardship loans are not like other loans that are designed to meet an expected or planned need (like a car loan or a business expansion loan).

Note that most lenders require a credit score of at least 620 to qualify.

Every lender sets its own guidelines when it comes to minimum credit score requirements for debt consolidation loans. However, it's likely lenders will require a minimum score between 580 and 680.

What counts as a successful DMP? You're making a success of your DMP when: You're making realistic payments on time each month. It runs smoothly alongside your other expenses, so you always have enough for priority bills and living costs.

Your Bank Account & A Debt Management Plan

In conclusion, a Debt Management Plan (DMP) does not directly affect your bank account. You can usually continue using your current bank account as usual when you enter a DMP providing that you do not wish to include a debt on your DMP that is with your bank account provider.

You'll also want to notify your creditors of your decision so you can discuss the path forward. Pay off your debts. There's generally no penalty for making extra payments on your DMP, and if you can afford to pay off all of your balances at once, that'll end your agreement early. Stop making payments.

Things like utility bills and your existing mobile phone contract can continue to be paid on a monthly basis during a DMP. It's unlikely that you'll be able to take out any other form of credit as the supplier will complete a credit check on you and likely refuse your application.