Three effective ways to get rid of debt burden
Living with mounting debt burden creates several chaos and embarrassment. It disturbs your monthly budget. Phone calls from lenders perturb your mental peace. Your credit score dips down making your incapable of raising fresh credit at the time of need. Your property might be in risk as lenders can repossess it get back their money. Restructuring and choosing a budget-friendly repayment plan will definitely help you in this regard. To avail such facility, you have to go for financial tools like debt management, IVA and bankruptcy. Every tool mentioned above has its own sets of advantages and disadvantages. In this article we will discuss about them in brief.
Debt management or debt consolidation can be defined as a process where your multiple high interest unsecured loans are merged to a lower rate secured plan. It also covers your credit card, store cards and overdraft debts too. Debt management plan makes your repayment of existing debt burden through a single monthly installment. The installment amount is prepared according to the loan you owe, your monthly income and expenditure. In a nut shell, your repayment capacity is given higher priority while estimating the monthly installment. Debt management plans come with secured debt consolidation loans and help a lot to improve your credit score.
Bankruptcy refers you the extreme financial instability while you are devoid of resources to get rid of your existing loans. Filing for bankruptcy helps you to get rid of overwhelming debts. Both individuals and organizations can opt for bankruptcy to make a fresh start. However, this is subject to some restrictions. Applying for bankruptcy ensures a fair sharing of your assets among your lenders. It is a legal binding process and only court of law declares you bankrupt after going through your bankruptcy plea. Your lenders can also file bankruptcy against you. To file such suit the lender needs to have at least £750 debt burden on you. An insolvency practitioner deals with your bankruptcy case and ensures that you remain debt free with in 12 months.
You can also take help of Individual Voluntary Agreement to get rid of mounting debt burden. This is a legal binding agreement where insolvency practitioner negotiates with your lenders to settle down an affordable monthly repayment plan. When 75% of your lenders agree to it IVA plea is filed at court. The tenure of this agreement is generally five years. During this period you need to stick to the monthly installment. After five years, you are declared debt free even if you have not repaid the entire amount. During IVA, lenders are debarred from repossessing your home. As your IVA petition is not publicized you enjoy the same credibility as before. Doctors, police officers, bankers and people serving in armed forces generally choose IVA for this purpose only. During the tenure of IVA you can raise fresh credit too.
