subject: Debt Management What Options Are Available [print this page] Debt Management What Options Are Available
The economic climate of the country, and indeed, across the globe is such that financial stability is something you can no longer take for granted. Added to this is the 'easy ways out that allow us to indulge our desires; be it credit cards that enable us to shop more than we can afford or the installment plans that allow us to purchase a car or any other consumer product. And to top this, if your business closes down or you lose your job, what you would have to handle, apart from other troubles, is a bad debt situation, where you find yourself unable to pay off your loans.
If you find yourself in serious debt, realise though it is a difficult situation it is not the end of the world and there is always a way out. You can seek debt advice from experts who will recommend solutions to manage your debt and help you regain financial stability.
There are a broad range of debt solutions but generally they are classified as:
IVA
Debt Management Plans
Debt Consolidation
Bankruptcy
IVA:
An IVA is a legal process introduced as part of the "1986 Insolvency Act". As per the law, debtors can make a formal proposal to their creditors in order to clear their debt. The purpose of the proposal is to demonstrate to the creditors that they have more to gain from it than what they would were the debtor to be declared bankrupt. As part of an IVA arrangement, all interest on the debts is frozen and other charges dropped. At the end of the arrangement, all outstanding balances are written off and the debtor is free to make a fresh start.
Debt Management Plans:
Unlike an IVA, debt management plans (DMP) are 'informal' arrangements reached between the debtors and their creditors for the clearance of the debt. Given the fact that these plans are not legally binding, both creditors and debtors can end the arrangement any time they wish. Debt management plans are ideal for those who are facing a temporary financial setback, for example, due to loss of job. To qualify for a DMP, debtors must have a minimum of 3000 worth of unsecured non-priority debts. Non-priority debts include credit cards, bank loans, over drafts, catalogues, store cards etc that are not secured on property and other assets such as car etc. Things like mortgage, utility bills, council tax, CSA payments and student loans can't be included in your debt management plan.
Debt Consolidation:
Debt consolidation means to take one large loan to repay multiple smaller unsecured debts. The advantage is that instead of making multiple payments over a month to multiple lenders, debtors just need to make one payment to one creditor. Generally, debt consolidation is a secured loan, or a loan secured on property, vehicle or other valuable asset etc which means that it comes with a lower rate of interest than unsecured loans. So instead of paying higher interests on unsecured loans, debtors need to pay a lower rate of interest, which allows them to save some money. Besides, a debt consolidation loan can be for as long as 25 years, which means smaller monthly repayment for the debtor.
The above are just a brief outline of the options available. It is advisable to seek debt advice for debt solutions that meets your individual requirement. You can talk in confidence to our expert advisors who would study your situation and then recommend a particular solution like IVA and also the providers who specialise in dealing with that particular solution.
