Free Glide

Problem debts? – Think about the solutions

Rather than struggling to keep up multiple payments to multiple debts, some debtors decide to consolidate their debts – applying for a consolidation loan that’s big enough to pay all their smaller debts off. This means they’ll only have one payment to make per month, thus reducing the risk of missing a payment (and the charges and damage to their credit rating that can result).

Plus, a consolidation loan can come with a lower interest rate than many other forms of unsecured credit. It can also give the individual the opportunity to think about their financial circumstances and arrange to repay the debt consolidation loan at a rate they can afford – again, repaying a debt more slowly will mean it takes longer to pay off and can end up costing more, so it’s vital to weigh up the pros and cons before proceeding.

A form of insolvency, an IVA is a legally binding agreement between the borrower and their creditors. If you owe around £15,000 or more to more than two unsecured creditors, an IP can tell you whether an IVA might be the best way for you to deal with your debts. If they think it is, they can draw up an ‘IVA proposal’, detailing how much you can afford to pay towards your debts every month for the next (normally) five years, once you’ve taken your essential expenses into account.

If enough of your creditors to the IVA proposal, the IVA can start. You’ll agree to make those monthly payments (and usually free up some equity in your home, if you’re a homeowner), and they’ll agree to freeze your debt, hold off on any legal action (such as trying to make you bankrupt) and write off any outstanding debt once the IVA has successfully concluded. Please note: an IVA will have a serious impact on your credit rating, potentially making it harder to borrow money for the next six years.

Who an Individual Voluntary Arrangement (IVA) is right for: people who are in debt to three or more unsecured creditors a total of around £15,000 or more and can’t afford their monthly repayments – but can afford regular smaller payments.

Fourth: Trust Deeds. A Protected Trust Deed is similar to an IVA, but only available to residents of Scotland. In most cases, a Protected Trust Deed will last for three years.

Who a Protected Trust Deed is right for: residents of Scotland who owe three or more unsecured creditors a total of around £10,000 or more and can’t afford their monthly repayments – but can afford regular smaller payments.

Finally, no debt solution is ‘right’ for everyone. If you’re in debt, it’s vital to talk to a debt adviser who understands all the available debt options and can help you choose the solution that’s right for you.