Not all debt is bad. Debt becomes bad when you cannot afford to repay your credit commitments. In some cases this is where the level of debt is very high, but not always. There are many people who owe small levels of debt but still can’t afford their repayments.
Always seek expert professional advice. There are a number of rogue companies who will gladly help you get into more debt!
One Advice will be happy to help discuss any possible alternatives to an IVA plan, please contact our freephone number for more information, 0800 019 5870.
If you are still considering your options then you might want to try the One Advice 1 Minute Debt Wizard which will show you some of your Debt Solution options based on your finances.
Trust Deed:
If you are looking for an IVA alternative as you are a Scottish resident and are not eligible then a Trust Deed could be for you. It works on a similar principle to an IVA.
Debt Management: (Homeowners and Tenants)
Debt Management is an alternative debt repayment plan to an IVA that allows you to pay just one low affordable monthly payment to your creditors. If you qualify for an IVA you should explore that option first before accepting a debt management plan. A debt management plan does not offer you legal protection from your creditors, does not automatically freeze interest and charges and does not allow you to write off a substantial amount of your unsecured debt.
However, if you are not eligible for an IVA or cannot afford further borrowing, a debt management plan shows a commitment to your creditors that you want to pay off your debts in full and as a result the pressure applied by your creditors and their collections agents will reduce.
Debt Management is an informal arrangement between you and your creditors. The Debt Management Company offers your creditors a reduced monthly payment and charges you a monthly management fee, typically 20%.
There are 3 potential drawbacks to a debt management plan:
A debt management plan is not really a debt solution. It does not solve your debt problem. What it does is to allow you to manage debts thereby reducing creditor pressure and giving you peace of mind. But creditors are not legally bound by them and can still take recovery action.
Bankruptcy:
Bankruptcy should only ever be considered when all other options have been exhausted. Only take professional advice from a Licensed Insolvency Practitioner.
Secured Lending: (Consolidation/Re-mortgage for Homeowners Only)
Consolidating all your unsecured debts into one affordable secured payment may be an option. If you have more equity in your home than you have unsecured debts, it may be possible to qualify for a secured loan, consolidation loan or a re-mortgage. Providing that you can afford additional borrowings, this could be a good option for you. If you have less equity than your unsecured debt, further borrowing against your home will not be appropriate for you as it would still leave you in debt and could put your house at risk.
Never secure your unsecured debts on your home if you think you may struggle to make the repayments in the future, because you are putting your home at risk. Seek expert help to determine whether you can afford the repayments and remember that the salesperson you are speaking to does not have your best interest at heart, but is thinking of the commission that they will earn from your loan!
Unsecured Lending:
Obtaining an unsecured loan at a sensible interest rate is always difficult if you are financially stretched or have been refused in the past
If we assume that you have already explored borrowing from your bank or building society or increasing the limits on your cards and still have a requirement for additional borrowing, then the truth is that you are probably already financially stretched. You probably don’t need to borrow more money, but rather you need to make your existing debts more affordable.