Employ the service of a debt Manager today!
Your debt manager will:
- Go through your finances with you
- Prepare a Financial Statement and Budget
- Agree an affordable monthly payment with you
- Negotiate with your creditors
- Distribute your payment to your creditors
Debt Management
" A debt management plan is designed to help you make affordable and sustainable repayments each month to your creditors".
If you’re debt is getting out of control you should always try to approach the creditors in hope of reducing the monthly payments. This is most effectively achieved through the use of professional debt managers.
A financial statement will be taken to discover what money you can afford to pay your creditors after living costs and overheads are paid for. This surplus is then divided amongst your creditors on a pro-rata basis and offered as part of an informal arrangement.
But trying to get all your creditors to agree to reduced payments can be hard work, especially when their collection departments only know one word, "No".
Balance transfers
Credit card balance transfer simply means moving your debt from one card to another. It's often a good way to save money, as many credit card companies offer an interest free period on balance transfers to new customers. You can even consolidate your debts by transferring the balance from more than one card. Or, you might find a lower interest rate than the one you are currently paying.
How?
It's straightforward. You apply for the new credit card and, if your application is accepted, you can transfer your existing balance by giving your new card issuer the details of your old card.
You may need to transfer your money as soon as you get your new card to be eligible for the introductory offer. Many credit card companies have online banking so you can do the balance transfer yourself. You can also transfer existing debts from store cards
Consolidation Loans
This sort of loan is used to consolidate your existing debts into one single new loan, with lower monthly payments. The payments being lower for two main reasons:
- (a) The loan is spread over a longer period of time than your existing debts
- (b) The interest rate being charged is less than the average rate on your current debts.
Debt consolidation loans can be either secured or unsecured. A secured loan uses something of significant value to secure the loan amount. The most common source of security for such a loan is your home. Secured loans are less risky for the lender, usually leading to a lower interest rate and larger amounts available for borrowing.
An unsecured loan is not secured against something of significant value, so it is much riskier for the lender. This type of loan usually comes with higher interest rates, smaller amounts available for borrowing, and often includes restrictions on how you can spend the money you receive
Individual Voluntary Arrangements
This is the formal alternative to using a debt management company. A financial statement is produced and a surplus which can be paid to your creditors is calculated.
To get an IVA in place, 75% of the creditors need to agree to the terms and conditions of the arrangement. Get their agreement and the arrangement is set in stone, an improvement over the informality of a debt management plan. In addition interest charges will be stopped and a proportion of the overall debt may be written off.
The process of getting an IVA in place can take 4 to 6 weeks. IVA’s are only practical where debts exceed £15,000.
Borrowing again to get out of debt?
You may be tempted by newspaper ads or mail shots offering loans to pay off existing debts (sometimes called consolidation loans). Some of these loan companies offer advice on debt problems. But you have to pay for the advice and they encourage you to take out another loan as the solution to your problems. These loans can be very expensive and you might end up worse off than before. In most cases, the lender will require you to put up your house as security. Fail to pay and you'll lose the roof over your head. Get independent advice first. Being offered further credit is no guarantee that you can afford the repayments. Think very carefully before taking on further loans.
Bankruptcy
The most extreme option available but one that should be considered, particularly if things are really bad. In certain circumstances it can be the best option. But once you are declared bankrupt you are likely to be locked into it for many years. The long-term ramifications of which include: being unable to access credit, be in certain types of business or open a bank current account.
"Bankruptcy is seen as the last resort"