The latest figures from Credit Action reveal that the levels of personal debt were down in 2011 from the level experienced in 2010. While this is good news, debt problems still plague many in the UK and every day 331 people are declared bankrupt or insolvent. Personal debts have gone down but are still in the trillions of dollars. People wishing to avoid having to declare bankruptcy often take advantage of an IVA. An IVA is an Individual Voluntary Arrangement that allows individuals to make repayment proposals to a creditor using the services of an Insolvency Practitioner.
An Individual Voluntary Arrangement Can Help Your Finances
Taking advantage of an IVA is a way to preserve your credit score and help you avoid a blight on your financial record. The IVA was established in 1986 as part of the insolvency act. An IVA has been used successfully by many people to get control of their debts.
Besides using an IVA there are other things that can be done to help repay debt and avoid having to file for bankruptcy. One of the most important things is to keep up with payments. Credit cards, especially, should be paid down as quickly as possible. This is because credit cards are often the debt that carries the highest interest charges. Switching over to a lower interest card is a good way to make inroads into paying off the balance.
Missed payments are noted by credit reporting agencies and each time this happens, your credit score goes down by a few points. Having a low credit score makes it difficult to get loans such as mortgages and car loans. If you do obtain a loan while your credit score is low it means you will only get sub-prime loans which come with sky-high interest rates.
It may be possible to consolidate the most expensive debts into one large loan since this is likely to have a much lower rate of interest than debt such as credit cards. When the debt situation is dire, the only loans that should be taken out are the ones to pay off existing high-interest debt. If you are having trouble making monthly payments to your creditors, it is essential to call them and let them know.
It may be possible to arrange for lower monthly payments or to have the interest on the account frozen. There is another option that allows you to freeze the account for an agreed upon period. During this time you could pay only a small fee, such as £1 per month, until your finances have been sorted out.
Free Credit Counseling
If your creditors are not receptive and you are still struggling to pay your debt, there are charities that can help. Consumer Credit Counseling and asCredit offer free and confidential advice and they can be contacted via Freephone. When you contact these charities they help you through a range of solutions that are appropriate for your level of debt.
This may include a DMP or Debt Management Plan that is paid directly to the charity or another company that has arranged this plan for you. They will then distribute the payment amongst your creditors in agreed upon proportions. All these services should be free of charge to you and you should never have to pay a fee for this type of debt advice. Taking these types of actions should help get the debt under control before it is too late.