Solutions to personal debt
Solutions to personal debt
Rather than struggling to keep up multiple payments to multiple debts, some people decide to consolidate their debts - repaying their smaller debts with one large loan. This means they’ll only have one payment to make per month, reducing the risk of missing payments (and the charges and damage to their credit rating that can result).
Plus, a consolidation loan can come with a lower interest rate than many other forms of unsecured credit. It can also give the individual the chance to think about their finances and arrange to repay the loan at a rate they can afford - again, repaying a debt more slowly will mean it takes longer to pay off and can end up costing more, so it’s vital to weigh up the pros and cons before proceeding.
Individual Voluntary Arrangements. A form of insolvency, an Individual Voluntary Arrangement is a legally binding agreement between a borrower and their creditors. If you owe around £15,000 or more to multiple unsecured creditors, an Insolvency Practitioner (IP) can tell you whether an IVA might be the best way for you to cope with your debt. If they think it is, they can draft up an ‘IVA proposal’, detailing how much you can afford to pay towards your debts every month for the next (normally) five years, once you’ve taken your essential expenses into account.
If enough of your creditors agree, the IVA can start. You’ll agree to make those monthly repayments (and possibly free up some equity in your home, if you’re a homeowner), and they’ll agree to freeze your debt, hold off on any legal action (such as trying to make you bankrupt) and write off any outstanding debt once the arrangement has successfully concluded. Please note: an IVA will have a serious impact on your credit rating, potentially making it harder to borrow money for the next six years.
Who an IVA is right for: people who owe money to three or more unsecured creditors a total of around £15,000 or more and can’t afford their monthly repayments - but can afford regular smaller payments.
Trust Deeds. A Trust Deed is similar to an IVA, but only available to residents of
Who a Protected Trust Deed is right for: residents of
No debt solution is ‘right’ for everyone. If you’re in debt, it’s vital to talk to a debt specialist who understands all the available debt options and can help you choose the option that’s right for you.
