Debt Help Or Hindrance - How to Choose the RightDebt Relief
There is a lot of money to be made out of people with debt problems.
You'd be forgiven for thinking that debtors would be the last group of people which businesses can earn a fortune from, but they are.
The main reason is that people in debt are under immense pressure and are willing to turn to any port in a storm, crying aloud from their sinking ship: "Just stop my creditors from hassling me!" The problem is that of the four main debt relief sources:
How does this happen you may ask.
Well for starters, many debtors are in desperate situations and when we get into tight spots we sometimes lose our faculties and throw our better judgement aside.
The debtor therefore is responsible for doing their homework and ensuring they are signing up for the right kind of debt help.
Companies you see will make more money from setting up an IVA (Individual Voluntary Agreement) or a Bankruptcy than a Debt Management Plan.
Therefore it's not good for business to sell the latter when the former will earn them thousands of pounds.
So here is a quick run through of the differences between the various forms of debt relief which should just be a spring board to proper research.
Debt Management Plan A debt counsellor will calculate your earnings against your outgoings, including all your debts and assess your suitability for a DMP.
If you have nothing left at the the end of your outgoings, the counsellor will have nothing to barter with and won't waste their time approaching your creditors.
If you do have some disposable cash at the end of the month, they counsellor will contact your creditors in a bid to reduce your interest rates, freeze any charges and ultimately get you a better deal.
A DMP is free to set up and does not get lodged on your credit file.
IVA An IVA is an arrangement made between you, a third party and creditors.
It is legally binding and will be lodged on your credit file for the duration of the agreement plus one year.
An IVA is expensive to set up but can wipe up to 70% of your debts.
The third party will arrange payments to be made to your creditors, while charging you a commission for their services.
Bankruptcy Bankruptcy is also expensive to set up and will only be granted under certain conditions.
If the bankruptcy court deems you are able to repay your debts, or at least some of them, you will be forced to take out an IVA.
If on the other hand you have limited unsecured debt (the kind you can reduce under an IVA) and lots of secured debt, you will probably have to apply for bankruptcy.
Your bankruptcy will be made public through the local newspaper and you will have it on your credit file for up to 7 years, or more.
Bankruptcy clears most debts and is designed to give you a fresh start.
Debt Consolidation Loans If you are falling behind on multiple debts, you can combine them into one lump some and repay the entire debt off in monthly installments.
It makes repayment simpler and cheaper - as a debt consolidation loan should only be considered if at a lower interest.
The term of your loan agreement can also be reduced, meaning you get out of debt faster.
You'd be forgiven for thinking that debtors would be the last group of people which businesses can earn a fortune from, but they are.
The main reason is that people in debt are under immense pressure and are willing to turn to any port in a storm, crying aloud from their sinking ship: "Just stop my creditors from hassling me!" The problem is that of the four main debt relief sources:
- Debt Management Plan
- IVA
- Bankruptcy
- Debt Consolidation Loans
How does this happen you may ask.
Well for starters, many debtors are in desperate situations and when we get into tight spots we sometimes lose our faculties and throw our better judgement aside.
The debtor therefore is responsible for doing their homework and ensuring they are signing up for the right kind of debt help.
Companies you see will make more money from setting up an IVA (Individual Voluntary Agreement) or a Bankruptcy than a Debt Management Plan.
Therefore it's not good for business to sell the latter when the former will earn them thousands of pounds.
So here is a quick run through of the differences between the various forms of debt relief which should just be a spring board to proper research.
Debt Management Plan A debt counsellor will calculate your earnings against your outgoings, including all your debts and assess your suitability for a DMP.
If you have nothing left at the the end of your outgoings, the counsellor will have nothing to barter with and won't waste their time approaching your creditors.
If you do have some disposable cash at the end of the month, they counsellor will contact your creditors in a bid to reduce your interest rates, freeze any charges and ultimately get you a better deal.
A DMP is free to set up and does not get lodged on your credit file.
IVA An IVA is an arrangement made between you, a third party and creditors.
It is legally binding and will be lodged on your credit file for the duration of the agreement plus one year.
An IVA is expensive to set up but can wipe up to 70% of your debts.
The third party will arrange payments to be made to your creditors, while charging you a commission for their services.
Bankruptcy Bankruptcy is also expensive to set up and will only be granted under certain conditions.
If the bankruptcy court deems you are able to repay your debts, or at least some of them, you will be forced to take out an IVA.
If on the other hand you have limited unsecured debt (the kind you can reduce under an IVA) and lots of secured debt, you will probably have to apply for bankruptcy.
Your bankruptcy will be made public through the local newspaper and you will have it on your credit file for up to 7 years, or more.
Bankruptcy clears most debts and is designed to give you a fresh start.
Debt Consolidation Loans If you are falling behind on multiple debts, you can combine them into one lump some and repay the entire debt off in monthly installments.
It makes repayment simpler and cheaper - as a debt consolidation loan should only be considered if at a lower interest.
The term of your loan agreement can also be reduced, meaning you get out of debt faster.
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