As household debt continues to rise, at the same time as many household incomes are flat lining, there is increasing concern about how many people can meet their existing debts. Unemployment and falling incomes also mean that there is more danger of many people accumulating further debts, to cover every day living expenses.
Clearing debt is never easy, particularly for those on low and falling incomes, but in recent years, there has been an increase in companies within the financial sector, providing advice and help with debts of all sorts.
Debt consolidation has become increasingly popular recently. This is because you can easily combine several debt repayments into one easier to manage monthly fee – and you don’t need to take out further loans or credit to do it.
There are a number of ways that you can consolidate debts and these include Debt Management Plans, Individual Voluntary Arrangements (IVA) and Protected Trust Deeds.
The main differences between these are:
Debt Management Plan: This is a flexible solution that enables you to repay your debts at a rate you can afford. Negotiations with lenders will be taken care of on your behalf and you will make one payment a month. If you choose to do this through a professional debt management company, they will normally take a monthly fee for managing repayments, distributing payments to your lenders and the on-going admin and management of the Plan. This is great if you just need some breathing space from lenders while you work towards getting back on your feet again and repaying your debts.
IVA: This is a legally binding solution so you will be protected from lenders chasing payments. Repayments are based on what you can afford, and any debts that still exist at the end of the IVA term, which normally lasts for 5 years, will be written off.
Protected Trust Deed: This is a specialist debt solution available to people who live in Scotland. It’s also a legally binding solution – granting you protection from lenders. Repayments are based on what you can afford, and any debts that still exist at the end of the Protected Trust Deed term, which normally lasts for 3 years, will be written off.
These consolidation solutions can be helpful for people who find it difficult to deal with multiple payments each month and they can be an excellent way of reducing pressure from lenders. And providing you keep to the terms of the debt solution, you’ll clear your unsecured debts.
How to find a debt consolidation company?
There are a number of companies offering debt help and consolidation services, but how do you know which one to choose?
Look for regulated companies that adhere to a standard code of conduct for your country. This code ensures that customers are provided with the best advice, correct information and the right solution for their circumstances. Basically, the code of conduct ensures the company conducts all business compliantly and ensures you’re treated fairly at all times.
Debt can be very worrying and while debt consolidation can help to lessen the immediate impact of debt, you should look at your financial habits to change you financial future so that you can live a life free from debt.