If you are swimming in debt, it may be time to go beyond spending less and juggling repayments. Perhaps you are paying some creditors on time and others late. Or worse taking out more loans and applying for new credit cards to try to keep your head above water. The chances are the longer you plod on this way the bigger your debt will become.
There are other options available. You could, for example, follow the advice from Creditfix and consider one of the options briefly outlined below.
Independent Voluntary Arrangements
IVAs have been available in England and Wales since 1986. This arrangement enables you to go from having to juggle multiple repayments to making just one per month. This payment goes to your Insolvency Practitioner (IP). They then split the funds between your creditors following the agreement they have made with each of them while acting as a mediator between you and the people you owe money to.
The agreement is a legally binding one, which typically lasts either 5 or 6 years. At the end of that time period, you will be debt-free. Provided of course you have not run up any fresh debt, which hopefully you will not do. The last thing you need is to go through all of that stress and strain of trying to manage crippling debt a second time.
Debt consolidation loans
We have spoken about this type of debt solution in the past, so will not go over old ground here. Basically, a debt consolidation loan is exactly what it sounds like. You use another line of credit to borrow enough to pay off a range of other debts.
Debt settlement offers
It is possible to approach creditors and negotiate to settle your debt by paying them a lump sum. Some of the people you owe money to may agree to accept less than what you owe them as full settlement of your debt. They are willing to do this because getting that lump sum off you is a better bet than hoping you will continue to make and catch up with your repayments.
For those people whose debts are so big that none of the above solutions is likely to be adequate, there are still other options available. But, they are not to be entered into without careful consideration. Bankruptcy (sequestration in Scotland) and Debt Relief Orders (DROs) will both impact your long-term financial life. You can find out more about the process here.
Do more research before deciding which approach to take
These are the most commonly used tools for those who need a way out of crippling debt. They all work well.
But, it is important to realise that all of the above arrangements have their pros and cons. None of them should be entered into lightly. You need to do more research and should only take action when you are 100% sure that you know what you are doing. If you have any doubts, whatsoever, the best approach is to seek advice from an independent debt advisor or speak to an organisation like the Citizen’s Advice Bureau.