There are a number of ways in which to manage debts, and the best one for any individual will depend on specific circumstances. In essence there are three basic categories of methods for getting out of debt, and they all have different impacts on the lives of the people who use them.
Insolvency is one such category and is the one that has the largest impact. There are two forms of insolvency in England and Wales. These are bankruptcy and IVAs (Individual Financial Arrangements). With these you are able to write off debts that you cannot afford to repay however they will make it very difficult for you to obtain credit in the future. An IVA can last for five years before it is discharged and during that time you will not be able to borrow any money. Bankruptcy has even more serious implications.
Getting debt management advice is a way of dealing with existing debts. Advice will include changing your debt and repaying it at a lower rate and over a longer time span that was agreed initially. Often a debt management plan will include persuading creditors to freeze interest rates and other charges. The problem with this approach is that your credit rating will be seriously affected and the fact that you have taken out a debt management plan will remain on your credit report for six years.
The way of dealing with unaffordable debt that does not impact on your credit rating is debt consolidation. This is where you take out a loan that will repay all your existing debts so that instead of servicing them individually you make a simple monthly payment. It is often possible to find a consolidating loan at a lower rate than at least some of your credit cards are charging currently, though as it will be taken out for a longer period the total amount of money you repay will be more.
Debt consolidation is particularly applicable if you have equity in your home to use as security, but in certain circumstances it is also available to people who do not.
Insolvency is one such category and is the one that has the largest impact. There are two forms of insolvency in England and Wales. These are bankruptcy and IVAs (Individual Financial Arrangements). With these you are able to write off debts that you cannot afford to repay however they will make it very difficult for you to obtain credit in the future. An IVA can last for five years before it is discharged and during that time you will not be able to borrow any money. Bankruptcy has even more serious implications.
Getting debt management advice is a way of dealing with existing debts. Advice will include changing your debt and repaying it at a lower rate and over a longer time span that was agreed initially. Often a debt management plan will include persuading creditors to freeze interest rates and other charges. The problem with this approach is that your credit rating will be seriously affected and the fact that you have taken out a debt management plan will remain on your credit report for six years.
The way of dealing with unaffordable debt that does not impact on your credit rating is debt consolidation. This is where you take out a loan that will repay all your existing debts so that instead of servicing them individually you make a simple monthly payment. It is often possible to find a consolidating loan at a lower rate than at least some of your credit cards are charging currently, though as it will be taken out for a longer period the total amount of money you repay will be more.
Debt consolidation is particularly applicable if you have equity in your home to use as security, but in certain circumstances it is also available to people who do not.