15th April '08 - Debt Management Advice Could Save Your Credit
With average consumer loan balances and credit card debt continuing to rise, more and more people are struggling with the overwhelming prospect of managing unmanageable debt situations. Obviously, the best approach to manage debt is to be proactively responsible and not take on more debt than can be easily repaid. This is easier said than done for many borrowers. Society is becoming more and more influenced to borrowe money for non-essential purchases. Debt management is becoming increasingly crucial for many Brits who need help.
Debt management approaches vary. The first step for someone who finds himself facing overwhelming debt is to get debt help or debt advice from knowledgeable experts. There may be options initially for debt consolidation or other self-directed approaches to creating a more manageable opportunity. Debt consolidation loans are a great way to reduce the number of creditors one owes, and to potentially turn higher interest rate debt into lower rate debt.
Sometimes consumers are simply too deep into debt to find lenders willing to work with them directly. Lenders who see desperate borrowers are cautious about taking on additional risk. Borrowers who can neither repay their debt or find ways to manage it, must consider working with debt management programmes or service providers to find alternatives to bankruptcy. Bankruptcy is a very negative financial manouveure that makes it extremely difficult for people to ever get financing.
There are multiple debt help programmes. The first step for the borrower is to get debt advice from experts more knowledgeable about all the options to manage debt. These debt help programmes usually can take one borrower’s situation and help him to explore the best debt management solution.
One alternative to bankruptcy that many borrowers are becoming more aware of is an IVA. An IVA is an individual voluntary agreement. By working with a debt help specialist, borrowers can compare IVA plan opportunities with other debt solutions. These unique solutions have many great benefits compared to bankruptcy. They often include significant write offs of existing debt. They involve repayment plans that pay off the loan, in a manageable way, within five years. Any outstanding balance is usually wiped out after this time. As importantly, there is less long-term negative impact on borrower credibility. Borrowers need to carefully explore this important debt help opportunity with experts to get its greatest benefits.
IVA as a debt management solution can be an attractive option. However, there is no guarantee that a borrower can obtain this type of debt help. IVA plans are government supported, which makes them extremely credible debt solutions. The obstacle to getting one is that creditors must ultimately agree to the plan. Debt specialists work with creditors to develop a plan that is beneficial to both parties. Creditors would prefer to get repayment of the entire debt, but they also need to consider the advantages of collecting some of the debt versus none. To be enacted, 75 per cent of a borrower’s creditors must agree to the developed IVA plan. If 75 per cent approval is obtained, the other creditors must abide by the agreement.
John Smith is the author of this debt management article.
This article does not represent ‘financial advice’ as each person's individual requirements will be unique to their own needs. If there is something in the article which you may wish to rely on, ensure you check those details with the person or company with whom you arrange financial services.
The views in this article represent those of the author and not those of Netbasic Limited.
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