Enrolling in a debt management program should not impact your ability to finance or lease a car or qualify for a student loan.
While creditors may void benefits if you apply for new credit cards on a debt management program, this does not extend to car loans, mortgages, student loans and other types of debt.
If you are shopping for a new car and financing while on a debt management program, here is what you need to consider:
If your current vehicle is in good working condition, don’t trade it in for something newer. Once it is paid off, keep driving it for as long as possible, saving the monthly payment in an emergency fund or use it to pay off your debt faster.
A low credit score, low income and high debt will negatively impact your ability to qualify for automobile financing at favorable rates, not participation in a debt management program. Learn more about how to improve your credit score while enrolled in a debt program.
You will have no problem qualifing for a student loan while on a debt management plan. Government-backed loans don’t use you credit report to determine if you qualify, so the deb management plan won’t penalize you. Private lenders do, and might not be interested in dealing with you. If you’re offered a scholarship or grant from your college or university, take it. It’s money that helps offset your costs and has no impact on your management plan.
Whether you are applying for a car loan, mortgage or personal loan, here is some advice to help you qualify at favorable terms.
Before taking out a new loan, especially one with a high monthly payment, be careful.
Another thing to remember when applying for any sort of loan is that a debt management plan isn’t necessarily a scarlet letter on your financial life. Debt management companies don’t report your participation in a program to the credit bureaus, although your creditors might. Your score may initially decline when your current accounts are closed, but it should improve as you make consistent on-time payments.
And there seems to be little consensus among lenders about what a debt management plan says about your ability to handle debt. Some even view it as a positive, demonstrating that you are conscientious about paying you loans rather than defaulting.
Even if your debt program restricts opening up new credit card accounts, other types of loans won’t violate the terms of your agreement. You can get a mortgage while on a debt management program, assuming you meet the underwriting standards.
As a rule, you should always consult review your budget if you want to borrow anything while under a debt management plan. Even if you can borrow, remember that the reason you entered the plan is to get out of debt as quickly as possible. Taking on additional debt might defeat your objective.
NA, (2012, November). Coping with Debt. Retrieved from: https://www.consumer.ftc.gov/articles/0150-coping-debt