For many people, taking out a loan is deemed the only way to consolidate debts. But in the current climate, with credit harder to come by, this is often no longer an option. Here are some other options available to consolidate debts that don’t include taking out a loan.
Other ways to consolidate debts
Debt management plans
A debt management plan enables people who are struggling to keep up with repayments on their unsecured debts (credit cards, store cards, overdrafts, personal loans, catalogues etc), to make repayments simpler and more manageable. This is done by gathering multiple debts into one single monthly payment which is rescheduled over a longer period of time, making the repayment more affordable. Debt management is a flexible way to consolidate debts – which basically means that repayments can be altered to suit your changing circumstances. So if you find your wages are reduced, your repayments can be reduced too – or if you get a promotion or your circumstances change for the better and you want to repay debts faster, your repayment can be increased. As part of our service, we negotiate on your behalf with creditors to reduce or freeze interest and charges on your accounts. We can also handle all of your letters and phone calls from creditors, so you don’t have to. Eventually these will stop as they realise that we are acting on your behalf. Debt management is informal and enables you to take control of their finances – so when your situation improves and you no longer need our assistance, you aren’t tied-in to a contract.
Individual Voluntary Arrangements (IVA)
An IVA works in a similar way to a debt management plan, so you still would only make one single monthly payment to consolidate debts whilst still covering all of your unsecured balances. An IVA is repaid over a fixed period of time though – usually five years. After the IVA term is complete, all remaining unsecured balances are effectively written off. With an IVA all additional interest and charges will stop being added too. A qualified insolvency practitioner will be required to complete the IVA. They will draft a legally binding contract between you and your creditors, which protects you from creditors changing their payment demands. All phone call and letter demands should stop too, as communication is carried out via your insolvency practitioner.
Trust Deeds
A Trust Deed is similar to an IVA but is for people living in Scotland. The term for a Trust Deed is usually shorter – typically three years. Again, like an IVA, after this time all unsecured balances remaining will be effectively written-off. For information on all of our debt solutions, please click the link.
Companies who offer programmes to help you consolidate debts
Reputable companies offering free debt advice and a free IVA advice screening include The Debt People, Hamilton Locke and Chiltern. Their debt advice is free and their programmes to consolidate debts are tailored to your individual needs. For further information on these companies, please click on one of the links below.
