Money Management
If you are having money troubles then a simple review of your finances can provide a solution.
For example keeping a diary of all your monthly purchases and withdrawals can show you exactly where your money is going and allow you to indentify any unnecessary expenditure.
Writing and sticking to a monthly budget can help prevent debts from building up as can getting in to the habit of using cash or debit cards to make small purchases rather than credit cards.
Advantages
- reviewing your finances is relatively simple and cost free
- if you cant cut back on your outgoings or if you are already in a large amount of debt then this is unlikely to offer a solution
Debt Management Programmes (DMP's)
A Debt Management Programme (DMP) is an informal arrangement made between yourself and your creditors to reduce the amount of your monthly repayments.
This agreement can be arranged by the Citizens Advice Bureau or most likely through a commercial Debt Management Company.
In return the Debt Management Company will charge a monthly fee along with an initial set up fee.
Advantages
- can be a good solution and allow you breathing space if your financial problems are only temporary, for example to cover a short period of unemployment
- the fees charged by the debt management company will be added to your existing debts increasing the amount you owe and the length of time it will take for it to be repaid
- the informal nature of the agreement means that your creditors have no legal obligation to stick to it
Individual Voluntary Arrangements (IVA's)
If you owe greater than £15000 and you have multiple creditors then you may qualify for an Individual Voluntary Arrangement. Under the terms of an IVA a person commits to make monthly payments of what they can reasonably afford based on their current income.
The IVA payments are made for a fixed period of time after which all remaining unpaid debts are written off.
An indepth review of Individual Voluntary Arrangements can be found at our specialist site IVA Advice.org.uk.
Advantages
- your debt repayments can be reduced by as much as two thirds
- you will be expected to repay only what you can reasonably afford based on your current income
- at the end of the IVA any remaining debts will be written off
- an IVA is only an option for people fitting a fairly narrow qualifying criteria
- even if you qualify there is no guarentee your creditors will accept the IVA proposal
- it is usually a more expensive option than filing for bankruptcy
Debt Consolidation Loans
A Consolidation Loan is used to pay off a persons existing debts. Rather than making multiple payments to all your creditors after the Consolidation Loan
you will only have one monthly debt repayment to manage.
Advantages
- consolidate your debts into one single repayment at a favourable rate of interest
- only beneficial if the rate of interest on the loan is no higher than that of the existing debt and is sufficiently low to allow the loan to be repaid over a reasonable length of time
- if your credit rating has been affected then taking out a loan may not be an option
Bankruptcy
Bankruptcy is often seen as a 'last resort' solution for individuals in financial difficulties, however in many cases it is also the most suitable. This is especially the case if your debts are large but you
dont qualify for an Individual Voluntary Arrangement.
Advantages
- a guarantee that your debts will be cleared in a fixed period of time
- the bankruptcy repayment period is shorter than is the case in a typical IVA
- it is likely that you will lose your home and other valuable assets
- your credit rating will be affected for six years meaning it can be hard for you to obtain credit
- you may be excluded from certain professions and the bankruptcy will be made public
If you want to break out of the credit card debt spiral then call us today on 0800 043 50 43 for a FREE and confidential discussion on all your credit card consolidation options.