Those unfortunate enough to find themselves in a position where they feel they're
only option to attempt a recovery from their degree of debt, have many types of debt help solutions available to them. It is important to understand each one before proceeding.
Debt Advice -
It is important before proceeding with a debt solution that you make a well informed decision of what is suitable for you. Many debt management companies offer a free service where they give a well informed opinion on how to tackle best your debt problems. A possibility is that the advice given is to work your way out of debt by yourself using budgeting techniques etc.
However should the amount of debt be so severe the advice would most probably be ton choose from a debt solution. This could be in the form of a debt management plan, debt consolidation or an Individual Voluntary Arrangement (IVA).
Debt Management Plan -
A debt management plan would be advised to those people who are unable to make the agreed repayments to their unsecured debts. A plan involves negotiating a smaller monthly payment with each of your unsecured creditors. However smaller monthly payments will lead to a longer loan term meaning that overall you will pay off more debt but over a longer period of time.
You can create your own debt management plan and make the negotiations on your own however this facility is also available from debt management agency. However it is important to realise that by entering into a debt management plan you are defaulting on an original agreement which will affect your credit rating for a minimum period of six years.
Debt Consolidation -
A slightly different way of reducing monthly repayments would be to go to a debt management company would ultimately take your debt from you but offer you a loan for the total amount owed to your creditors but over a longer period of time. Again this would mean more debt is incurred overall and fees would be owed for taking the service.
IVAs (Individual Voluntary Arrangements) -
IVAs are advised with debt amounts of 15,000 and over where the individual is unable to commit to repaying the loan amounts in a reasonable amount of time. An IVA is a better alternative than bankruptcy as it ensures that the individual's house is not at risk of being repossessed.
Once the agreed period of 5 years is over then any remaining unsecured debt is written off however an IVA does adversely affect your credit rating for a period of 1 year.