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Car finance ›
Can you get car finance with a Debt Relief Order (DRO)?
Updated: Monday, 18 September 2023
If you have a Debt Relief Order (DRO) in place or have had one in the past, you may be wondering if this impacts your credit score and your ability to get car finance. In this article, we’ll look at the ins and outs of whether you can get car finance if you have, or have previously had, a DRO, and what you should know before applying.
What is a Debt Relief Order (DRO)?
A DRO is a way of dealing with debts if a person can’t afford to repay them. When you have a DRO in place, you won’t have to repay certain types of debt for the duration of the DRO. Once the DRO ends, which is usually after 12 months, any debts included in it will be written off.
You can only apply for a DRO through an ‘approved intermediary’, such as a debt advisor, who will check whether you meet the specific criteria. The application will then be sent to an ‘official receiver’ (this is an officer of the bankruptcy court), who will decide if the DRO is granted.
The criteria to be eligible for a DRO includes:
- You owe £30,000 or less
- You don’t own your home
- You lived or worked in England or Wales in the previous three years
- You have less than £75 to spend per month after bills and expenses
- The things of value that you own, and any savings you have, aren’t worth more than £2,000
- You haven’t had a DRO in the previous six years
- You’re not involved in bankruptcy proceedings or other insolvency proceedings
Does a Debt Relief Order affect your credit score?
If you’ve got a Debt Relief Order, or have had one in the past, it will affect your credit score. This could make it more difficult to obtain credit in the future.
After the 12-month period ends, it can still affect your ability to get credit. This is because a DRO will show on your credit file for six years from the date it was approved.
Whether you are currently in a DRO, or had one in the past, there are some things you could do that might improve your credit score:
- Check your credit report and make sure all your information is up to date
- Register for the electoral roll if you haven’t already
- Try to keep your credit utilisation low and make repayments on time
Can you own a car while in a Debt Relief Order?
Whether or not you can own a car while in a DRO depends on several factors. If you’re unsure, you should check with your DRO advisor who can help further.
Generally, you can’t apply for a DRO if you have more than £2,000 in ‘assets’. This includes cash, money in bank accounts, savings, and the value of items you own such as your mobile phone.
According to Citizens Advice, your car doesn’t count as an asset so long as it is worth no more than £2,000 in England and Wales, or £1,000 if you live in Northern Ireland. Only one vehicle won’t be counted as part of your assets. There are certain situations where this might be different, such as if you use the car for business purposes, or if the car has been adapted to accommodate a physical disability.
If you have a car on Conditional Sale finance, it may not be counted as an asset because you don’t legally own the car. With CS agreements, the finance company owns the car until you make the final repayment. Depending on the circumstances, you may not be allowed to keep making repayments while the DRO is active.
Other types of finance might be different, and some lenders might have a clause in the contract that lets them automatically end the agreement and re-possess the car if you enter a DRO.
If you’re a Moneybarn customer and are experiencing financial difficulties, there is support available. Please contact us and our team will be happy to discuss your options.
Can you get car finance with a Debt Relief Order?
During the first 12 months when a DRO is active, there are certain restrictions placed on you. One of those restrictions stops you from applying for credit or finance for more than £500 without telling a potential lender about your DRO.
As one of the criteria for being granted a DRO means you have £75 or less in monthly disposable income, affordability checks usually mean a car finance agreement wouldn’t be deemed affordable.
If you’ve had a DRO in the past, you may need to use a specialist bad credit car finance lender such as Moneybarn. A responsible lender will use several checks to make sure any finance they offer is affordable to you. At Moneybarn we’d review your circumstances on an individual basis before deciding whether we can lend to you.
Representative 30.5% APR.
If you have a Debt Relief Order (DRO) in place or have had one in the past, you may be wondering if this impacts your credit score and your ability to get car finance. In this article, we’ll look at the ins and outs of whether you can get car finance if you have, or have previously had, a DRO, and what you should know before applying.
What is a Debt Relief Order (DRO)?
A DRO is a way of dealing with debts if a person can’t afford to repay them. When you have a DRO in place, you won’t have to repay certain types of debt for the duration of the DRO. Once the DRO ends, which is usually after 12 months, any debts included in it will be written off.
You can only apply for a DRO through an ‘approved intermediary’, such as a debt advisor, who will check whether you meet the specific criteria. The application will then be sent to an ‘official receiver’ (this is an officer of the bankruptcy court), who will decide if the DRO is granted.
The criteria to be eligible for a DRO includes:
- You owe £30,000 or less
- You don’t own your home
- You lived or worked in England or Wales in the previous three years
- You have less than £75 to spend per month after bills and expenses
- The things of value that you own, and any savings you have, aren’t worth more than £2,000
- You haven’t had a DRO in the previous six years
- You’re not involved in bankruptcy proceedings or other insolvency proceedings
Does a Debt Relief Order affect your credit score?
If you’ve got a Debt Relief Order, or have had one in the past, it will affect your credit score. This could make it more difficult to obtain credit in the future.
After the 12-month period ends, it can still affect your ability to get credit. This is because a DRO will show on your credit file for six years from the date it was approved.
Whether you are currently in a DRO, or had one in the past, there are some things you could do that might improve your credit score:
- Check your credit report and make sure all your information is up to date
- Register for the electoral roll if you haven’t already
- Try to keep your credit utilisation low and make repayments on time
Can you own a car while in a Debt Relief Order?
Whether or not you can own a car while in a DRO depends on several factors. If you’re unsure, you should check with your DRO advisor who can help further.
Generally, you can’t apply for a DRO if you have more than £2,000 in ‘assets’. This includes cash, money in bank accounts, savings, and the value of items you own such as your mobile phone.
According to Citizens Advice, your car doesn’t count as an asset so long as it is worth no more than £2,000 in England and Wales, or £1,000 if you live in Northern Ireland. Only one vehicle won’t be counted as part of your assets. There are certain situations where this might be different, such as if you use the car for business purposes, or if the car has been adapted to accommodate a physical disability.
If you have a car on Conditional Sale finance, it may not be counted as an asset because you don’t legally own the car. With CS agreements, the finance company owns the car until you make the final repayment. Depending on the circumstances, you may not be allowed to keep making repayments while the DRO is active.
Other types of finance might be different, and some lenders might have a clause in the contract that lets them automatically end the agreement and re-possess the car if you enter a DRO.
If you’re a Moneybarn customer and are experiencing financial difficulties, there is support available. Please contact us and our team will be happy to discuss your options.
Can you get car finance with a Debt Relief Order?
During the first 12 months when a DRO is active, there are certain restrictions placed on you. One of those restrictions stops you from applying for credit or finance for more than £500 without telling a potential lender about your DRO.
As one of the criteria for being granted a DRO means you have £75 or less in monthly disposable income, affordability checks usually mean a car finance agreement wouldn’t be deemed affordable.
If you’ve had a DRO in the past, you may need to use a specialist bad credit car finance lender such as Moneybarn. A responsible lender will use several checks to make sure any finance they offer is affordable to you. At Moneybarn we’d review your circumstances on an individual basis before deciding whether we can lend to you.
Representative 30.5% APR.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
