I`m struggling with rent arrears - which debt solution is best?
Rent arrears can be one of the most worrying kinds of debt - after all, your home may be at stake.
Catching up on rent arrears can be difficult, because you`ll always have this month`s rent to think about, too - as well as payments to your other financial commitments, including any unsecured debts you have. If you`re struggling, there are a number of debt solutions that could help.
What should I do if I`m in rent arrears?
In the first instance, you should always contact your landlord (or lettings agent - whoever is responsible for dealing with any problems regarding your rent) to explain the situation. Being honest and open about any issues will show a willingness to put things right.
In the majority of cases, your landlord may agree to some kind of repayment agreement on your arrears. Rather than have you evicted, they`d probably much rather come to an agreement in which they can get back the money they are owed - so if you can arrange to repay the arrears over a set period of time, they may well agree.
In fact, if you are a council or housing association tenant, you will have certain rights under your agreement, such as the right to go to court, and to pay the arrears over a reasonable period of time (assuming that`s a realistic option).
However, not everyone`s situation is this simple. Not all landlords will agree to an alternative repayment agreement - or it may be that you are so far into arrears that you can`t see yourself being able to repay them within a reasonable period of time. If any of these points apply to you, you should contact a professional debt adviser to discuss your options.
Whatever your situation - whether you`re a council / housing association tenant or renting from a private landlord - your debt adviser will be able to advise you on your rights.
How can a debt adviser help?
A debt adviser can also offer help and guidance on a range of debt solutions that could help you to clear your debt arrears.
However, you shouldn`t go ahead with any of these debt solutions unless you`ve talked it over with your debt adviser and confirmed that it will definitely make a difference to your situation - if you are simply addressing the symptoms rather than the cause of the problem, you may find that your problems will continue in the future.
If there is an underlying problem causing your rent arrears - you have an erratic income, for example, or you`ve over-extended yourself financially - then certain debt solutions might only solve your problems temporarily.
Some of the most common debt solutions available include:
- Debt consolidation loan - a loan big enough to pay off multiple existing debts, effectively `consolidating` them into one. By including your rent arrears when you`re calculating how much to borrow, you can pay off your landlord and then repay the new loan in manageable amounts over a longer period (depending on the terms of your loan).
However, bear in mind that you will still have to repay your rent as normal alongside your debt consolidation loan repayments. If you are already stretched financially, a debt consolidation loan is unlikely to make a big enough difference to really help. - Debt management plan - an informal arrangement with your lenders in which you`ll agree to repay your non-priority debts (credit cards, unsecured loans, etc.) in smaller amounts over a longer period of time.
Your monthly payments to your debt management plan would be based on what you can afford after you`ve accounted for your essential expenses (rent, utility bills, food, etc.).
Because rent arrears are a priority debt, they wouldn`t be included in the debt management plan itself, as you need to pay them off as quickly as realistically possible. However, your unsecured lenders may agree to accept smaller payments towards their debts for a few months, while you repay your rent arrears - after which you will be free to pay more towards your unsecured debts.
This can be quite a time-consuming arrangement, so you may want to let a professional debt management company arrange the plan on your behalf in this case. - IVA (Individual Voluntary Arrangement) - a formal, legally-binding arrangement with your unsecured lenders in which you`ll agree to repay as much of your debt as you can afford (within a set time period), and write off the rest.
This usually involves making monthly payments towards your debts over a five-year period, although the timescale can vary depending on what is agreed with your lenders.
As with debt management, your monthly payments to your IVA would be based on what you can afford after you`ve accounted for your essential expenses (rent, utility bills, food, etc.). Your unsecured lenders may agree to accept lower payments towards your IVA for a few months while you repay your rent arrears, on the grounds that your payments increase as soon as the arrears are paid off.
If you can`t commit to regular monthly payments, an IVA will not be suitable.
All of these debt solutions have their advantages and disadvantages - depending on which solution you`re considering, you may affect your credit rating, for example, or you may end up paying more overall to clear your debt. And they`re not appropriate for everyone. You should always speak with a debt adviser before deciding which is right for you.
For more information on tackling rent arrears, call our expert debt advisers today on 0800 161 3516.
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