Six Steps to Solving Debt
If you’re struggling under the pressure of growing debt, following these six important steps will help you to become debt free. Of course, everyone’s financial circumstances are different so there is no single debt solution that will suit everyone. It’s only in the most severe cases that an individual will have to go through all of the steps. The idea is that the fewer steps that it takes to tackle your financial problems and get you debt free, the better.
1. At the first sign that you are struggling to keep up with your repayments, talk to your creditors. As simple as it sounds, if you show that you are dedicated to paying off your debt, in most cases they will do what they can to accommodate a re-evaluated repayment schedule. You should also consider getting some independent financial advice from a specialist debt advisor at the earliest opportunity. Drop into your local branch of the Citizens Advice Bureau or get in touch with Debtsolver.
2. If your debt problems are based on mortgage arrears, as with point one, you should talk to your mortgage provider as soon as possible. You may find that you can negotiate a revised payment plan, which could reduce the amount you pay each month. If you own a significant proportion of the equity in your home, you have substantial bargaining power when it comes to remortgaging.
3. If the bulk of your debt is unsecured, a Debt Management Plan can give you the support of a dedicated team of debt specialists, negotiating with your creditors in development of a repayment schedule to reduce your monthly outgoings. It’s not another loan; it’s one affordable monthly payment which is distributed among your creditors. With the support of Debtsolver, you can also encourage your creditors to freeze interest and additional charges.
4. If you want to clear all of your previous debts and take advantage of a reduced rate of interest, a Debt Consolidation Loan could be the solution to your debt problem. In addition to a lower rate of interest, debt consolidation has the added benefit of a simplified repayment schedule. Instead of a range of payment amounts going out at various points throughout the month, you’ll have the security of a steady budget. The loan can either be unsecured or secured against an asset like your home. Secured against collateral, you’ll often achieve a lower rate of interest, making the consolidation loan cheaper.
5. An IVA, or Individual Voluntary Arrangement, could prove to be your best option when struggling to service unsecured debt with at least three creditors which amounts to a minimum of £15,000. It differs from the more informal debt management plan in that an IVA is a legally binding contract made between you and your creditors. Debtsolver will help you to draw up a proposal, with the aim of reaching an agreement with your creditors to repay a realistic, affordable proportion of your outstanding debt over a set period, usually 60 months. The purpose of it is to become debt free but also avoid bankruptcy through settlement with the majority of your creditors. Even a proportion of your original loan total could prove to be preferable to them, when taking into account the expense of pursuing a bankruptcy order.
6. Bankruptcy is the most serious debt solution on the market. It’s certainly recommended that you consider the other options available to you first. Debtsolver will support you through the bankruptcy proceedings and you will eventually be free from debt. However, your assets may be sold to generate payment for your creditors. It’s important to remember that some debts, like your student loan and any outstanding Court fines, aren’t written off as part of your bankruptcy. It’s also worth considering the stigma associated with bankruptcy, which sadly, many people still believe surrounds the process as your bankruptcy will be advertised in your local newspapers and the London Gazette.
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