Many consumers have learnt their lesson the hard way – in this day and age, being extravagant and spending money you don’t have is foolish. However, despite our sensible reluctance to spend on unnecessary luxuries, those small, unaccounted for purchases can significantly add to our existing debt. Thus we can end up struggling to pay off our debts while the interest rate piles up. This results in significant financial problems.

If you find yourself struggling with debt, and with few prospects of getting it cleared, you need financial assistance right away. This is a vulnerable time for you as you are more likely to accept any offer available to you. Caution is advised here as quick fix solutions often end up creating far bigger debt problems. Many people suffering from debt find themselves confused by their options.

There are a few debt solutions out there that can help relieve debt in a manageable way. In order to make an informed decision about which debt solution is best for you, you need to know as much as your can about the options available.

Here we look at the differences between Debt Management and an IVA – both possible debt solutions with different advantages and disadvantages.

Debt management

Debt management is a possible way to eliminate your debt. A debt management plan is an effective solution to paying off your debt under the best terms possible. You will make one monthly payment which will be distributed amongst your creditors. You will then make consistent, timely payments and in return you can enjoy reduced interest rates. The single payment helps reduce confusion and allow for a more efficient financial process provided you honour your monthly commitments.

Debt management, however, does not reduce how much you owe, but instead offers reduced interest rates, helping you pay off your debt faster. Some creditors may state in your credit file that you are participating in a credit counselling programme, but it ultimately will not affect your credit score. Also, you will no longer have to be in constant contact with your creditors in order for debt elimination to take place.

Debt management considerations:

• All your debts will be repaid over time
• Your creditors may not agree to a change in the applicable rate of interest
• Creditors will still be able to demand quick repayment of the debt. They can still take legal action against you.

Individual Voluntary Arrangement (IVA)

An IVA is a more serious debt solution. With an IVA, your Insolvency Practitioner (IP) will negotiate with your lenders in the hope that they will accept less than what you actually owe. But while this is advantageous to the debtor, your credit score will be affected in a negative way. Also, your IVA will reflect on your credit score for 1-6 years.

As opposed to a debt management programme, this debt solution is a formal arrangement. It is a legally binding agreement between the debtor and the creditors.

IVA considerations:

• Because this is a formal agreement, the debtor will be bound by its terms. Failure to comply with these terms could result in the debtor filing for bankruptcy.
• The terms of the agreement can be quite strict and rigid, so the debtor has to fully understand these terms before accepting it.
• The debtor will not be allowed to take out any other credit agreements once committed
• It will be noted on your credit record. However, after five years, you will be able to improve your credit rating score once again.

The decision you make will affect your financial future, so best speak to a financial expert, allowing you to make an informed decision.

Nothing everyone is educated about potential financial pitfalls and debt can pile up quicker than most people realise. Careful analysis and a little research suggest it is possible to get out of the mess. It won’t be immediate but it is possible to continue living your life without having to dread the constant reminders arriving in the post.

There is help available to most people who are alarmed to discover that they do not know how to handle the amounts of debt they have built up over the weeks, months, and years. Not everyone manages to get to grips with credit card debt in just one month. Some people need a couple of months or longer as it requires a disciplined approach. Let’s look at a few reasons why someone may need debt help.

Unemployment. This is perhaps the single biggest reason why someone’s finances takes a journey – sometimes long, sometimes short – into the murky waters of debt and overspending. This has become even more commonplace since the recession when many companies have had to let go of thousands of workers. The people who lost their income often had little savings, which meant that they soon struggled to pay the basics – food, rent or mortgage, and travelling expenses.

This is put into perspective via a 2008 survey suggesting that the basic cost of living is £13,400 a year for a single person in Britain.

Existing debt problems. The majority of people with debt find it difficult to manage their finances. This is often because they have multiple creditors who demand multiple payments from them, often at different times of the month. Unsurprisingly, many people struggle to keep track of what they owe and the interest on the debt continues to mount. Companies such as Debt Solver succeed in helping those in financial difficulties because they understand how frustrating the process can be and have long term solutions in place.

Changing Life Circumstances. Most often this means their circumstances have changed for the worse due to an unforeseen event. There are numerous other reasons – besides unemployment – why someone needs debt help due to changing circumstances. Falling ill is one such reason, as is divorce. Any of these reasons could mean that the person has a smaller amount of disposable income, whether it is for a few weeks or a few months. This often means that they can benefit from a discussion about their finances with someone who is in a position to help them.

Debt consolidation is a form of debt management that allows you to organize and streamline your financial obligations helping you to avoid the more serious consequences of financial defaulting which could lead to bankruptcy. The concept behind debt consolidation is straightforward – you use one loan to pay off all your other debts and loans, leaving you with only one monthly payment and interest rate to take care of. This positively contributes to your credit score by allowing your current accounts, regardless of status, to be considered paid. You are also opening another account, which, if you keep up with your payment obligations, will actually serve to boost your previously faltering credit rating.

In order to gain control over your financial obligations, you need to do your research and find the right debt consolidation company to work with. Learn as much as you can about the company and their debt removal process. Ask for references from people you trust, and go online and check consumer reviews. Planning pays off so think longterm.

Before deciding on a debt consolidation plan, you need to get your financial affairs in order. Make a list of all the debt you want to include in the debt consolidation plan. Include creditor information, contact information, monthly payments, interest rates and current balances in this list. This will give you a better understanding of the amount of debt you have, what you need to clear and how long the process is likely to take. This can be difficult as seeing the actual amount could overwhelm you. Many people know they are in debt, but are in the dark as to how much they actually owe as the interest rate calculations are usually found in the small print down the bottom.

If you are looking for a way out of debt without seriously hampering your credit rating and score, debt consolidation may be the right choice for you. Debt consolidation is a smart alternative to getting out of debt while still maintaining a relatively good credit report. It can even give your credit rating a boost if handled in the right way.

Once your debt is cleared, your finances will take on a whole new look. Your credit score will be recalculated, thus reflecting a new, positive status and boosting your credit score. This credit score boost will serve as motivation to maintain this new and improved credit rating. You are now able to start afresh, understanding the implications of your spending habits and it gives you a future platform from which to monitor and control your spending levels.

The increase in debt levels among British women of all ages is worrying analysts. The rise has been alarming– a fivefold increase in the last 10 years. Even more worrying to some is the number of people who feel that they would be better off applying for bankruptcy. This number has risen sharply- in just one year, the increase was an astonishing 28%.

There are a number of reasons why some, not all, women are struggling on without getting proper debt advice. These reasons may be interlinked with the reasons why they fall into debt in the first place. Some of these reasons include: pride, uncertainty, reckless spending, and lack of familiarity with interest charges and late payment penalties.

Irresponsible spending is the principal reason why some women fall into debt but not all women can be generalised in this way. The vast majority of women receive debt advice from sources that often are ill equipped to offer advice or have underhand motives in their communications. Dubious financial practice among issuers of credit is a significant factor in why we are seeing such a spike in the numbers over the last 10 years.

Celebrities with their glamorous lifestyles have done a certain percentage of women – and men, too – a disservice in that they encourage a consumer culture of excessive and consequence free spending. This form of instant gratification spending has seen debt levels soar so high that many find it difficult to recover even after a period of 5 to 6 years.

Best practice suggests speaking to someone who can assist is the first step to debt recovery. Such a person generally works for a reputable debt consolidation firm. They can give debt advice and offer help with planning and organisation. This is not a quick fix but a long term plan for debt clearance that requires discipline and commitment. Use the company’s debt advice to plan and initiate your repayment process but be aware that the real solution has its roots in examining the underlying reasons that caused the problems in the first instance.

Some of these reasons include divorce, being a single parent and not having anyone to turn to for debt advice. Some of these problems are easy to overcome while others are not as simple and will require more of a prolonged effort from all parties concerned.

I once spent an afternoon in an academic bookshop looking at some book on ratios in nature. The book fascinated me and yet I shied away from a future in mathematics.

One thing I remember from reading some parts of the book is that ratios occur throughout nature and, without them, we as humans would be pretty lost. We wouldn’t be able to calculate a circle’s circumference to its diameter, eg. This would have implications throughout every sphere in our lives: architecture, science, and economics. And there are many other things that ratios apply to but let’s concentrate on the economical aspect and let’s be specific and only concentrate on how that relates to a hypothetical person’s financial life.

A debt-to-income ratio is not the only figure that needs attention but it is perhaps one of the more important ones in anyone’s financial portfolio analysis. This is true because it gives a snapshot of how much the person owes to various creditors versus how much income they are generating every month through a variety of other sources.

While it’s true that no single number should be used to diagnose the state of someone’s finances and that the analysis should instead focus on the bigger picture, the amount of debt needs to be within reason. It is better to not include potential future growth, future salary increases, and potential future book deals in spreadsheets that try to give a glimpse of how healthy your finances are.

Is there an acceptable level of debt that can apply to all individuals, never mind their age, income level or education? The easy answer is ‘yes and no’. Every person has a different tolerance for debt so don’t wish you had your neighbour’s debt levels; your own debt might not feel manageable but chances are that your neighbour’s payments on their new 4WD will give you an opportunity to experience your local emergency room.

It is important, however, to maintain debt levels that you can afford. Aim to keep your debt within a range that you feel comfortable with: some might feel comfortable with 10% of their monthly income while someone else, who has different needs, feels comfortable enough spending 20% of their monthly income on their debt.

Keep an eye on what percentage of your income goes towards servicing debt and you should be well on your way to a retirement that won’t force you to rely on your children or on social services.