Debt Solution Source

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As a result of the current state of the world economy and monthly expenditure increasing day by day, increasing numbers of people are finding it difficult to manage their finances. Having to borrow from Peter to repay Paul, and not knowing how you are going to manage from month to month, can be a constant worry and be very stressful. It is a vicious circle that is almost impossible to escape from once you are caught up in it. There are a number of options open to you should you find yourself in this situation and the purpose of this article is to give you an insight into what your choices are and how they work.

Debt consolidation: consolidation can seriously reduce your monthly budget and help get your finances moving in the right direction. Rather than having to find the money for a great many different loans and credit cards each month you apply for a larger loan and pay off all your outstanding debts, which means you have just one less expensive repayment to find every month. This not only results in more cash in your pocket every month it also helps get rid of all the anxiety that comes with it. Also by adopting this option your credit score will not be adversely affected, on the contrary so long as you keep up with your repayments it will increase your credit score.

Debt management: when you make use of a debt management programme with a debt management company, they will attempt to negotiate a minimised payment plan with all your lenders on your behalf. They will also ask them to freeze charges and any interest you are being charged, although they do not have to comply if they decide not to. You will then make one payment every month to the debt management company and they will make your repayments at the agreed rate. This removes all the grief of having to talk to the companies you owe money to yourself as all discussion will now be through your advisor. Almost all debt management advisors will charge you a fee and using debt management will have an impact on your credit record.

Individual voluntary arrangement (IVA): Entering into an IVA is similar to a using a debt management plan apart from the fact that an IVA is a legally binding document and so long as you get a majority vote from your creditors they all have to accept the agreement (75% by monetary value). The agreement is drawn up and administered by an Insolvency Practitioner (IP). All addintional charges will be stopped and a reduction of your debt will be discussed, up to 70% will potentially be wiped out. The agreement will usually run for five years and you could have to remortgage your home to pay off any outstanding debt on its expiry. You will be charged a fee by the IP and entering into an IVA will have an impact on your credit score.

Bankruptcy: registering as bankrupt is easily the most radical step that anybody can take, and may well end up in you losing your home. It will also have a lasting impact on your credit score.

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