Debt Management| Bad Credit Loans, Personal Loans, Getting a Loan

With so many of Britain’s population in debt, it stands to reason that one single solution will not suit everyone. There are many ways to solve debt problems, and this is a quick guide to the most common.

The option which should always be attempted first is simple debt management. This means either not getting yourself into a lot of debt in the first place, by being sensible with your money; or perhaps taking stock of the debt you do have and contacting your creditors to see if they can help you work through a solution. This may not work for large amounts of debt but for less serious cases honesty, a willingness to do better, and a phone call is all it takes.

If you cut back as much as you can and still can’t manage your debts, or you have unhelpful creditors, a consolidation loan could be an option. It goes without saying that you still need to have a reasonable credit score to get one of these at a decent rate, so it won’t work for the truly terminal cases. For everyone else however, a consolidation loan can be a good way to combine all your monthly payments into one, reducing both the amount and the risk of missing or forgetting to pay.

Now come the more drastic options. Bankruptcy is perhaps the scariest word to anyone with financial problems, but in extreme cases it can help by clearing off all your debts after a period of a year. The drawback is, you will be ‘named and shamed’ as a bankrupt, and your earnings will be taken over, leaving you with just your living expenses. An alternative to bankruptcy is an Individual Voluntary Arrangement, which works in a similar way but lasts over 5 years and doesn’t have the same stigma attached to it. With an IVA you are legally bound to a repayment plan with the majority of your creditors need to agree to, and you are then responsible for paying this off. Provided you have kept to the agreement, after 5 years the remainder of your debts are wiped off and you are classed as debt-free.

Of course, both these last options leave a scar on your credit file, so it’s always best to try and solve your debt problems without resorting to either an IVA or bankruptcy. Think carefully before taking out any kind of credit, and try to avoid getting into excess debt altogether.