Choosing the Right Debt Solution
If you’re looking to get out of debt, choosing the right debt solution is important. Each debt solution is designed to suit people in different situations, and the right choice can make a big difference to how quickly - and how easily - your debt problems are solved.
Debt management plan
If you are struggling to repay your debts under the current terms but think you may be more able to repay them at a slower pace, a debt management plan could help. A debt management plan is an informal arrangement between you and your creditors which allows you to make smaller monthly payments towards your debts.
Debt consolidation loan
A debt consolidation loan is particularly effective for people with multiple debts who want to reduce their outgoings and/or simplify their finances.
A debt consolidation loan is used to pay off all your existing unsecured debts, after which you will make single monthly payments to your new lender. It’s possible to reduce your overall outgoings by spreading repayments over a longer period, although you may pay more in interest than on a shorter repayment term. That said, if you consolidate high-APR debts (e.g. credit cards), you could still find yourself saving money on interest overall.
IVA (Individual Voluntary Arrangement)
An IVA is typically for particularly serious debt problems - usually £15,000 of debt, or higher.
An IVA is a legally-binding agreement with your creditors that allows you to avoid bankruptcy by paying off a pre-agreed percentage of your debts, and write off the remaining debt.
