Equifinance has witnessed a rise in clients wanting to exit their Debt Management Plan (DMP) as their financial circumstances improve.
The specialist second charge lender says that for many clients exiting a DMP by using a secured loan has resulted in a reduction in their monthly payments, allowed access to mortgage products and delivered a more credit-worthy profile.
Entering into a Debt Management Plan (DMP) can help get a client’s finances reorganised so as to avoid more serious difficulties later. However, it needs to be carefully monitored to ensure it doesn’t exacerbate the problems in the longer term, Equifinance warned.
Part of a DMP agreement should result in a cessation of interest and charges on the debt. However, there are many examples where interest is still charged and as such the balance is not necessarily reducing by 100% of the monthly payment.
Additionally, from a credit profile perspective, remaining in a DMP for the long term might also restrict the customer’s options from taking further finance such as a mortgage if they want to move house and could reduce access to more competitive products.
Tony Marshall, managing director of Equifinance, said: “As the general economy improves and optimism increases, we are being approached by more and more brokers whose clients’ circumstances have changed and now want to review their DMP. What was right for them a few years ago may not be right now.
“We welcome working with brokers who understand our straightforward and simple approach to underwriting, where each case is assessed to ensure suitability for the client both now and in the future.”