With the state of the world economy as it is and unemployment rising quickly, many people are finding debt to be a burden that they have the ability to no longer bear. This situation is compounded by the fact that for years credit was all to easy to get, with banks, finance companies and credit card companies actively encouraging people to take loans and credit cards, in some cases whether they could afford it or not. Total credit card debt in the UK is now over ?59bn, and the average adult in the UK has to work for 83 days just to pay the interest on debts each year. If you are one of the many thousands of people struggling to pay their debts, what can you do? Well there are many debt cures, the main ones being as follows:
IVA (Individual Voluntary Arrangement)
As part of the Insolvency Act 1986 the UK Government introduced a scheme enabling individuals to write off debt that they couldn’t afford, and thus avoid bankruptcy. In some cases as much as 75% of debt can be written off. All contact with creditors is taken over by the Debt Management Company, and threatening letters and phone calls stop. The individual is left with one, affordable, monthly repayment, interest is frozen, and the individual becomes debt free in 36 – 60 months. All assets (your home for example) are retained by the individual. Unsecured debts such as credit card debts, personal loans, store cards, and overdrafts are all covered by an Individual Voluntary Arrangement. Secured loans (mortgages), council tax arrears and fines are not covered. Anyone with debts of ?5000 or more, and 2 or more creditors, should seriously think about an IVA if they can’t afford their debt repayments.
Debt Management Plan
A debt management plan is less formal than an IVA. Interest is usually written off, or at least frozen, and again contact with creditors is taken over by the Debt Management Company. Repayments are re-scheduled, and again the individual is left with an inexpensive monthly repayment. Anyone with debts of ?2000 and above can apply for a debt management plan.
Consolidation Loan
A debt consolidation loan is suitable for those with debts that are more affordable, and to cope with unexpected debts or changes to circumstance. One single loan is taken out to pay off all other debts, resulting in a reduced monthly payment amount. This is because the interest rate on the loan is usually much lower than the existing debts (credit card debt can be very expensive), plus the loan can be taken over a longer period than existing agreements. Consolidation loans can often be secured against your property, bringing the interest rates down further still.
So there are alternatives available to anyone with debts that they can’t afford. The most important thing to do if you find yourself in that situation is to act sooner rather than later, as debt can escelate very swiftly.
Need money? Become a forex trader and solve all your financial issues!
