If you’re struggling to manage your finances, have mounting debts or have received letters demanding payments then you may have looked at the different debt solutions available to you.
From IVAs, to debt management plans and consolidation loans, there are so many different solutions out there that it can be difficult to know which is right for you.
With that in mind we look at some of the different debt solutions that you might have heard mentioned and explain a little more about them.
Debt Consolidation Loan
Consolidation loans are perhaps the most common debt solution available and one that you may have heard the most about.
A consolidation loan is a form of borrowing that is used to repay all of your existing creditors leaving you with only one repayment to make each month – making it easier to manage your finances.
In many cases you will benefit from reduced monthly payments, however, should you decide to reduce the amount you pay each month you could find yourself having to pay back larger amount in total. It’s also worth noting that consolidation loans are often secured against your home, so think carefully before signing up and ensure that you can afford the repayments.
An IVA, or Individual Voluntary Arrangement as it is also known, is a formal agreement between you and your creditors that is used to set out a timetable to repay your debt.
By registering for an IVA you will find that any interest or charges that you’re paying on your debts will be frozen. Also, a portion of your debt could be written off after five years.
Although there are many benefits to an IVA there are also drawbacks to consider. Firstly, your name will be entered on a public register and you will not be able to obtain further credit during the course of the IVA.
There are also strict guidelines you must adhere to during the course of an IVA and you may be required to remortgage your property.
Debt Management Plan
A debt management plan is relatively similar to an IVA although it is an informal agreement between you and your creditors and so can be setup quicker than an IVA.
With a debt management plan you will need to register with a financial provider who will negotiate with your creditors on your behalf and distribute payments each month. By opting for a debt management plan you will only be required to make a single, affordable payment each month, allowing you to regain control of your finances.
Whatever debt solution you opt for it’s important that you’re aware of every possible option available to you, included those that aren’t mentioned here. Although it can be difficult deciding exactly how to proceed, the best option is often to speak to an expert who can guide you through the process of finding a suitable solution.