Almost everyone in the UK has heard of debt consolidation, but do they really know what it means? Here is a basic rundown of UK debt consolidation.
Large Loan
The first component of debt consolidation is getting a large loan to pay off all your outstanding debts. By doing this, you no longer have to pay the high interest rates that usually accompany credit cards. Instead of making many small payments on your debt, you will make one large payment that has a reduced interest rate. This way, everyone wins.
Lower Interest Rate
One of the key tenets of debt consolidation is a lower interest rate. The main goal of debt consolidation in the UK is to reduce the interest you pay on your debts so you can focus on paying down your principle faster. When you get the loan to consolidate your debts, it has a lower average interest rate than your existing debts, therefore reducing your payments.
More Manageable Payments
As a result of the above, you get to take advantage of more manageable payments. There are fewer payments to make, and the overall interest rate is lower than what you were paying before. You will miss fewer payments, you will stop throwing money away on interest, and you will be reducing your debt.
Debt consolidation is not a difficult concept to understand. If you still don’t understand the basics of this, consider doing some supplemental research or even going to talk to an expert. The more you understand this, the more your will see how this is the answer to your problems.
An IVA is not something that you can do for yourself; it requires specialist handling. Below you will learn some of the most pertinent facts relating to IVAs that will help you decipher some of the technical jargon you might come across.
Timescale: Generally an IVA lasts for a period of five years over which time you must make regular and fixed payments.
Type of debt: IVAs only apply to unsecured debts such as credit cards, overdrafts and bank loans.
Payments: You make only a single monthly payment which will be based on the amount of money you can afford after taking your income and your living expenses into consideration.
Home: You will not lose your home but if it has equity than that could be used to reduce your debts.
Debt Write-off: Although you will need to make affordable regular payments for five years and to use equity in your home, any remaining unsecured debts will be written off completely.
Publicity: Details of your IVA will be published in the publically available Insolvency Register.
Acceptance by Creditors: For your IVA to go ahead it is essential that 75% of the money you owe is considered by your creditors as being acceptable for an IVA. If any of your remaining creditors disagree it makes no difference; they too will be bound by the IVA.
After Discharge: After your IVA has been discharged you are completely free to become a company director and start up a business.
Credit Rating: Your credit rating will be seriously damaged by an IVA. You will not be able to remove it from your credit report until at least six years after the IVA has been approved.
Further Borrowing: During the course of your IVA you will not be able to take out any further loans, though in practical terms even if this was allowed you would find it very difficult to do so.
IVA Qualifications: In order to qualify for an IVA you need to be able to show that you cannot afford to repay your current debts in a reasonable time scale, that you owe money to at least two different creditors, and that you are able to commit to make regular payments for the next five years.
Do you know when you should start consolidating your debts? Here are some signs that you should start looking into this helpful process…
When You Start Missing Payments
If you are starting to miss payments, for whatever reason, it is time to start consolidating your debt. Missing payments is a really bad thing, and you need to get on top of it as soon as possible.
When You Don’t Know What You Are Paying
Sometimes, people’s debt gets so bad that they don’t even know what they are paying out anymore – they just see the bills and try to make the payment. Being out of control in terms of your debt is one thing you really want to avoid, and when you have lost this control, it is time to consolidate your debt. There is no way you can efficiently control your debt if it is held in 10 or 15 different places, each with different due dates each month.
When You Are Ready To Attack Your Debt Head On.
Consolidating your debt is a good idea when you decide that you have had enough and you want to pay off your debts. There comes a point in your life where you have had enough and want to make some changes to secure your future. When you start to have these feelings, you should start looking into consolidating your debt and moving forward.
If you recognize these signs, you can start consolidating your debt before it is too late!
For people who are in debt, it can often feel that there is no help available. However, although this might have been the case in the past it is definitely no longer true –the amount of adverts currently on the television for companies that offer financial help prove that this is the case. It has never been easier to get help with debt, so there really is no reason to ignore the problem anymore –so many people are in debt as a result of the recession that there really is no stigma attached to having money troubles anymore.
One option for debt management is an IVA –an Independent Voluntary Agreement. An IVA is a legally binding contract, which a person who is more than £15,000 in debt sets up with their creditors. The person in debt can pay off part of what they owe every month, and the creditors will then get a share of the money that is paid in. The good thing about an IVA is that it will stop demands from creditors, and will also make sure that the debtor is fully able to pay off the set amount every month. After five years the remainder of the debt will be written off.
There are literally hundreds of websites that give information on what to do if you are in debt. Trained advisors will talk you through every step of the process, from deciding which programme might be right for you to making sure that you know all of the legal implications that come with setting up a scheme for debt management help. So even if you think you are ok to sort out the problem yourself, it might be a good idea to check the details with an expert anyway. The service is free and without obligation, so there is no reason not to.
Where do you go if you have a question about debt consolidation in the UK? Here are some of the first places you should look…
Internet
The Internet is a great resource when it comes to debt consolidation. There are piles of relevant information at your fingertips if you know where to look. It is important to make sure you only use information from trusted websites, but they are not that hard to find.
Books
Books are another great way to get help with debt consolidation. There are so many different books available on a whole range of financial topics, including debt consolidation. If you do chose to use a book for help, make sure the information is specific to the UK and that the information is up to date. It is not hard to find books that meet those requirements, though.
Accountants
Finally, when you have exhausted all other options for help, you can go and visit an accountant or a registered debt consolidation specialist. If you go to these people with a plan and some knowledge of the process, they will be able to help your quickly and easily. If you are lucky, you can find an organization that offers these services for free. Whatever the case, sometimes it is nice to talk to an actually person about your problems.
Don’t use a lack of knowledge as a reason not to consolidate your debt. There are so many resources that deal with debt consolidation in the UK, you just need to embrace them.
Many people think that debt consolidation in the UK is not for them. But, there are many different cases where debt consolidation is the best solution. Here are some times when debt consolidation should be the preferred path to financial recovery.
People Who Have Unmanageable Amounts Of Debt
The main reason people consolidate their debt is because they have a huge amount of debt and their interest rate is killing them. By consolidating your debt, you are taking the first step to getting back on financial track.
People Who Have Debt Spread Around
Most people don’t have debt in just one place – they have loans, mortgages, credit cards – all which are spread around with different companies. Sometimes, this in itself makes it difficult to keep track of your financial obligations. By consolidating your debt, you can get rid of all those payments and focus on making one payment per month. Sometimes, this is all it takes to get back on track.
People Who Want To Get Their Debt Paid Off Fast
Finally, if you want to get your debt paid off as fast as you can, you are an ideal candidate for debt consolidation. When you consolidate your debt, you are usually getting a significantly lower interest rate on your debt, which will allow you to pay off the balance at an increased pace. Interest is the number one problem in regards to paying off debt in the UK, and consolidating your debt makes it more manageable.
If you fall into any of these categories, you should definitely consider consolidating your debt today!
Have you ever wondered why people consolidate their debt? What does this seemingly basic idea do to help people pay off their debt faster? Here are the reasons why you should consider consolidating your debt.
Easier To Manage
After you consolidate your debt, it is a lot easier to manage. Most people have debt in multiple places, and sometimes it gets out of control. When you consolidate your debt, everything is brought into one or two payments, and it is just a lot easier to plan ahead and manage.
Quicker To Pay Off
Once you consolidate your debt, it won’t take as long to pay off your debt. When everything is bundled into one large payment with a lower interest rate, you start to make progress and your debt starts to disappear. If you don’t consolidate your debt and just continue making large interest payments, you are pretty much throwing your money away.
Easier To Afford
Finally, the last, and maybe most important reason why people consolidate their debt is because it is more affordable this way. The interest rates that you get charged can make you feel like you are spinning your wheels, not making and progress. But, when you consolidate your debt, you get to take advantage of a lower interest rate, so you can pay off more of your principle instead of just making payments on interest.
There are many reasons to consolidate your debt. If you have a large amount of debt, you should definitely consider consolidating it. You will be glad you did!
