A token payment plan is a form of debt management plan where you pay a nominal amount, sometimes as little as a pound or two to each creditor, because your income does not currently stretch to a genuine surplus once essential living costs are covered. It is usually reviewed regularly and increased once your circumstances improve. Because it exists precisely when there is little spare income, remortgaging or borrowing more while it runs tends to be difficult, though a like-for-like renewal with your current lender may still be worth exploring.
This page is for token, or nominal, payment arrangements specifically. For a standard debt management plan with a more typical monthly payment, see remortgaging with an active debt management plan.
On this page
This page covers
- Credit issue
- Debt management plans (DMPs)Usually stays on your credit file for depends on the individual accounts and markers.
Read the main guide: Remortgaging with a debt management plan
In short
- Token payments are set when income does not currently cover more than essential living costs.
- They are usually reviewed regularly and increased once your circumstances allow.
- Affordability for a new or larger mortgage payment is likely to be difficult while payments stay token.
- A like-for-like renewal with your current lender may be more realistic than borrowing more.
What is a token payment plan?
When a budget shows no or almost no spare income after essential costs, such as housing, food and utilities, a debt adviser may set up token payments instead of a standard debt management plan. Each creditor receives a small, nominal amount, often to acknowledge the debt rather than make meaningful progress against the balance. Token plans are usually meant to be temporary, common reasons being between jobs, reduced hours, ill health, or relying mainly on certain benefits, and are typically reviewed periodically as income allows.
How does a token plan differ from a standard debt management plan?
| Point to consider | Token payment plan | Standard DMP |
|---|---|---|
| Basis for the payment | Set at a nominal level because there is no real surplus | Based on an actual surplus after essential costs |
| Purpose | To acknowledge the debt while circumstances are difficult | To reduce the balance over time |
| Review frequency | Often reviewed more regularly, since it is meant to be temporary | Reviewed periodically, but may run more steadily |
| Credit file impact | Accounts may still show as in arrears or defaulted, depending on how creditors report low or nominal payments | Similar reporting, though a more substantial payment may be viewed differently by some creditors |
A general guide. Creditors decide individually how to report any reduced payment, whether token or standard.
Is it realistic to remortgage while on a token payment plan?
Usually not, at least for borrowing more or moving to a new lender. Token payments exist because your budget currently shows little or no room for extra commitments, and a mortgage lender assesses affordability in a similar way. If a debt adviser has concluded there is no spare income for creditors, a lender is likely to reach a similar view about a mortgage payment.
Applying for a remortgage when affordability is genuinely tight can lead to a decline, which shows as a hard search on your file even though the decline itself does not. It may be more useful to focus on what needs to change first, with help from a free adviser.
What needs to change before a remortgage becomes realistic?
A genuine, sustained increase in income, or a fall in essential costs, is usually what moves someone from token payments back to a standard DMP, and eventually to a position where a mortgage payment is affordable.
- A change in employment, such as returning to work or increased hours.
- A reduction in other committed outgoings, reviewed with your debt adviser.
- A period of stability once circumstances have improved, so a lender can see it is not temporary.
- An up-to-date budget from your provider showing the current payment level and reasons for it.
Your DMP provider or a free debt adviser can update your budget as things change, which also helps if you later want to discuss your position with a mortgage adviser.
What if you only need a like-for-like renewal, not extra borrowing?
If you are not trying to raise money and simply need a new deal because your current one is ending, a product transfer with your existing lender is worth asking about. Where you are not borrowing more, lenders can sometimes switch existing customers without a full affordability assessment, though your lender can still decide what to offer, particularly if your own mortgage payments have also fallen behind. If keeping up your mortgage is itself becoming difficult, speak to your lender early, as they must treat struggling borrowers fairly, and free advice from MoneyHelper, StepChange or National Debtline can help you look at the whole picture.
What may affect a remortgage while on token payments
| Factor | Why it matters |
|---|---|
| Level of spare income | This is the reason payments are token in the first place, and it is central to any mortgage affordability assessment too. |
| How long token payments have run | A recent, clearly temporary situation may be viewed differently from one that has continued for a long time. |
| Reporting on individual accounts | Creditors decide how to record nominal payments, which can include arrears or default markers. |
| Mortgage payment history | Keeping your own mortgage payments up to date, if at all possible, matters a great deal in this situation. |
| Whether you are borrowing more or renewing like-for-like | A product transfer with no new borrowing is generally more realistic than raising extra money. |
| Income source | Employed, self-employed and benefits income are all assessed differently by lenders. |
| Equity in the property | Even with strong equity, affordability on income is usually the limiting factor while payments are token. |
| Recent changes in circumstances | A documented, sustained improvement in income can change the picture over time. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Your DMP provider’s details and confirmation payments are currently token
- An up-to-date budget or statement of income and essential outgoings
- Details of each creditor and the amount being paid
- Your mortgage statement, deal end date and payment history
- Credit reports from Experian, Equifax and TransUnion
- Evidence of any recent or expected change in income
Frequently asked questions
Can I get a mortgage while I am only paying token amounts to my creditors?
It is very difficult, since token payments usually reflect a budget with no spare income, and a lender will assess affordability in a similar way. A like-for-like renewal with your current lender, rather than borrowing more, may be more realistic if that is all you need.
If my income improves, do I need to tell my DMP provider?
Yes. Token payments are meant to reflect your current circumstances, so a genuine increase in income should be reported so your provider can review and usually increase your payments. This also helps build a track record that may support a future mortgage application.
Can I still get a product transfer with my current lender on token payments?
It can be possible if you are not borrowing more, since lenders can sometimes switch existing customers without a full affordability assessment. Your lender can still decide what to offer, and your own mortgage payment history will matter.
Where can I get help if I can only afford token payments right now?
Free, impartial debt advice from StepChange, MoneyHelper or National Debtline can review your whole budget, not just your mortgage, and help you understand what might change your position over time.