Solutions to help you get out of debt

8 December 2009

There are a number of debt solutions that may be available to people in debt. Regardless of your situation - whether you`re managing your debts well and simply want to simplify your finances, or you`re actually unable to make your monthly payments - there may be a debt solution that could help.

However, deciding on which debt solution is right for you can be difficult. Each debt solution has its advantages and disadvantages, and it`s important that you ask an expert debt adviser to explain these to you before you make a decision.

Why are debt solutions so important?

Put simply, finding the right debt solution can make the difference between continuing to struggle with debt and getting on the road to recovery. There are debt solutions for people in all kinds of circumstances, and it`s important that you find the right one for you.

What debt solutions are available?

Some of the most common debt solutions include:

Debt consolidation loan

A new loan for paying off multiple existing debts. This means you`ll only have one monthly payment to deal with, instead of many. It may also be possible to reduce your monthly outgoings by paying the loan back over a longer period of time, although this might mean paying more interest in the long run.

Debt management plan

An informal arrangement in which you`ll agree to repay your unsecured debts in smaller amounts (based on how much you can afford) over a longer period of time. This can help you stay on top of all your financial commitments, since the payments to your unsecured creditors would be calculated to leave enough for your essential expenditure - things like your mortgage/rent, utility bills, food costs, etc. However, repaying any debt more slowly can end up costing you more - although your creditors may agree to freeze interest while your debt management plan is in progress.

IVA (Individual Voluntary Arrangement)

A formal, legally binding arrangement in which you`ll repay as much of your unsecured debt as you can afford, and have the rest written off on successful completion. You`ll normally make regular monthly payments for five years, and you may have to make additional contributions if your income rises or if you`re a homeowner (in which case you might have to release equity from your property).

All of these debt solutions come with their advantages and disadvantages, and the last two are likely to have a significant impact on your credit rating - so you should only go ahead if you are certain one of them is right for you.

For more advice on various debt solutions, click here or call 0800 161 3516.

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