Wednesday, August 17, 2011

Choosing the Right Debt Solution

No two debt solutions are the same and you really need to choose the right one for your circumstances. Some debts don't cause any real problems, while others are simply too difficult to manage without some professional debt help.

If you are trying to choose a debt solution at the moment, or would like to find out more about ways out of debt, read our short guide to debt solutions. If you would like to speak to a professional debt adviser, you could visit

If you'd like some more information first, here's a short guide to three debt solutions:

Debt consolidation loan

  • For people who can afford their monthly repayments.
  • Allows you to put all your debts in one place and make one repayment every month.
  • Possibility to lower your monthly payments, although spreading the loan over a longer term will increase the amount of interest paid.
  • Chance to take out a loan with a lower interest rate.

Debt management plan

  • For people who can't afford their monthly unsecured debt repayments.
  • Allows you to make a new arrangement with your unsecured lenders.
  • Make one repayment every month.
  • Will lower your monthly payments - although:
    • Defaulting on your original agreements would be recorded on your credit file for six years.
    • You could pay more interest overall by repaying debt over a longer period.
  • You lenders may agree to freeze interest and charges, but they don't have to.

Individual Voluntary Arrangement (IVA)

  • An IVA is a form of insolvency and an alternative to bankruptcy.
  • For people that have unsecured debts totalling £15,000 or more and can't afford to repay them.
  • With the help of an Insolvency Practitioner, you'd make a legally binding arrangement with your unsecured lenders, protecting you from further action.
  • Allows you to repay debt at a rate you can afford.
  • Makes essential living costs affordable while still repaying unsecured debts.
  • You may be required to release equity in your home, but if you keep making your mortgage payments, you shouldn't lose your home.
  • Entering into an IVA would be recorded on your credit file for six years and you would be listed on the Insolvency Register.
  • As long as you uphold your side of the deal, any outstanding unsecured debt will be written off on successful completion of the IVA.
If you would like to find out more about any of the debt solutions mentioned above, as well as other ways out of debt, follow the link in this article. You'll find details of how to apply for help, and an adviser can help you find the right approach for your situation.

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