IVA, DMP or Debt Consolidation – Which one?
If like millions of other UK citizens, you are struggling to repay loans or other forms of debts – there are plenty of options available. To choose which is the most suitable for you, first we must look at each one individually and assess their offerings:
An Individual Voluntary Agreement is a government backed, formal agreement between a borrower and lenders. This agreement is made for the borrower to pay a reduced amount towards their total debt, eventually paying off a percentage of the total. IVAs are only available to people that can prove that their living costs and monthly debt repayments add up to more than their monthly income. If you are saddled with debts of more than £15k, you can qualify for an IVA and be debt-free in only five years.
With an IVA, you must get the creditors to agree to the reduced repayments. An Insolvency Practitioner will do this for you, preparing an IVA proposal and presenting it to creditors on your behalf. Once the IVA has been agreed, you pay affordable amounts over a set period of no more than 60 months. The interest and charges will be frozen on the total, so the amount you pay back will not change from the start until the end of the IVA.
A Debt Management Plan is the most flexible solution to resolving your financial problems. It enables you to reduce the amount you pay every month, allowing you to get rid of your debts quickly and easily. The payment amount is decided by a debt management company on your behalf, but it will be a set monthly amount that is affordable and guaranteed to be a reduction on your current debt repayments.
With the debt management plan, there is a flexible option where you are able re-evaluate the payment plan and adjust the monthly payments accordingly. This can add a flexibility to your repayments to accommodate any change in your situation from sickness and injury to loss of employment.
Debt consolidation is one of the most simple and effective solutions to mounting debts, credit cards or other loans. Much like a debt management plan, this involves the movement of a variety of debts into one place where your repayments are set at a rate which you can afford.
Keeping up with payments on a number of different debts is time-consuming. It can also be stressful and so debt consolidation can prove the most suitable solution as it cuts your monthly outgoings whilst simultaneously putting all your debts into one handy place.
Debt consolidation loans can also provide you with a lower interest rate than you’re currently paying. So, with simple payments every month, you’ll know exactly how much you owe and when you’ll once again be totally debt-free.
All three of these solutions offer different advantages and disadvantages and each case must be considered on an individual basis. Whether you require a drastic debt resolution, flexible payments or a clear and simple payment structure – each financial plan offers much needed peace of mind while eventually leaving you debt-free.
Simon Madden is a debt advisor who is currently exploring places to find debt solution
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