People tend to bury their heads in the sand when it comes to sorting out debt reduction. People struggle to keep their heads above water, juggling debts and keeping up with unmanageable repayments. It’s a stressful and draining situation but taking control of debts could have amazing results.
How great would it be to have less worry and more money? For most people in debt, short of winning the lottery, the situation will only get worse unless action is take to gain back control. There are options available that help make this happen.
Debt management companies can act as the middle-man between debtor and creditors and provide repayment plans. They can normally advise on acceptable repayment amounts and act on the debtor’s behalf by actually arranging the agreed weekly or monthly repayments. Most companies are familiar with a range of creditors and have excellent working relationships with them. In a number of cases, interest and charges can be frozen, meaning that the amount repayable will not keep creeping up.
To give debtors an idea of how their money is being divided up between creditors and how much they still owe, most companies issue a quarterly statement listing this information. Other companies have their customers’ accounts available on-line so details can be checked any time. It is important to be aware that entering into a debt management plan can result affect credit rating. Charges for services may apply.
Another option is to take out a loan for consolidation purposes. This means that the debtor has the funds to settle all out-standing debts and will be left with only one creditor and one monthly repayment. Consolidation loans are preferable to a lot of people because it does not affect credit ratings, although, the loan may contribute to a worsening debt situation as people can be tempted to re-use recently paid off credit cards etc. Bad credit ratings can make it difficult to be accepted for a consolidation loan, especially if CCJs and/or default notices have been issued in the past.
There are a number of firms that offer loans specifically for people with bad credit but they usually involves a higher interest rate which, in turn, means higher monthly repayments. The option of secured and unsecured loads are normally offered.
When all over avenues have been exhausted, an IVA may be the best way to go. An Individual Voluntary Arrangement has to be organized by a licensed insolvency practitioner and it is a formal process involving an agreement between a debtor and their creditors.
A percentage of the total amount has to be paid back and payments are arranged over a five year period. The repayment amounts are decided once information regarding financial status has been obtained. Once repayments are agreed, a proposal is drawn up and signed. The practitioner will then attend a meeting with creditors who will decide if they are willing to accept the arrangement. If accepted creditor and bailiff action will stop.
All of the work, negotiation and meetings involved with IVAs are usually handled by an insolvency practitioner who should advise and inform throughout the process. It is unlikely practitioners will take an IVA case that has a low chance of acceptance.
All services and charges vary dependant on the company. It is advisable to research and choose a reputable company that offers the most suitable option, whilst searching for debt reduction solutions.
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