Coping with personal debt problems

“I’ve got loads of personal debt. How do I get out of it? It’s a common question these days, and a problem that’s made no easier by today’s economic troubles. But whatever debts a person is facing, likely to be at least one debt solution available to their situation.

Now we’ll consider just 4 debt solutions: debt management; debt consolidation; IVAs and Protected Trust Deeds. To some people, they’re only words - but to others, they provide the light at the end of a very rocky road. So how do they work? What’s the difference between them? Perhaps most important: which debt solution is right for me?

Let’s start with debt management. Basically, debt management means liasing with your creditors, asking them to agree to some changes to the original repayment terms. It’s easy for your situation to change in ways that mean you simply can’t keep up with repayments as originally accepted. You may have got made redundant, had a baby, or seen repayments (shoot up. Or maybe your debts just got out of hand.

Next: debt consolidation loans. Rather than struggling to keep up multiple payments to multiple debts, some people choose to consolidate their debts - repaying their smaller debts with one large loan. This means they’ll only have one payment to make per month, reducing the risk of missing payments (and the charges and damage to their credit rating that can result).

3rd: Individual Voluntary Arrangements. A form of insolvency, an Individual Voluntary Arrangement is a legally binding agreement between a 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.

4th: Protected Trust Deeds. A 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.

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 option that’s right for you.

This entry was posted on Thursday, October 30th, 2008 at 10:43 am and is filed under Finance News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.