Millions of families are finding it virtually impossible to cover household bills because of spiraling personal debts. According to national money education charity, Credit Action, UK consumers paid £76.2 billion in interest payments alone during the last 12 months. The average amount of interest paid by each household on personal debt was £3,124 during 2008.
How a Debt Solution Helps
- Write off debt. A debt solution can be used to deal with unsecured personal debts, such as personal loans, overdrafts and credit card debt. Either going bankrupt or a Debt Relief Order allows someone with money problems to become debt-free in just 12 months;
- Reduced monthly repayments. Debt solutions are designed to help people reduce repayments on personal debts in order to free-up money to help pay household bills;
- Freeze interest and charges. A debt management plan often enables a debtor to freeze further interest and charges, although there is no obligation on the creditor to agree to this;
- Prevents creditor harassment. A debt solution, such as an Individual Voluntary Arrangement or Debt Relief Order, means that creditor harassment is illegal once agreed. Whilst a debt management plan is only a voluntary agreement, creditor harassment is unlikely;
- Greater options. It is possible to use a debt solution to manage personal debts under £15,000 or write-off debt over £15,000.
Negative Aspects of Debt Solutions
- Bad credit rating. Starting a debt solution, such as a: debt management plan, Debt Relief Order or Individual Voluntary Arrangement, will result in a bad credit rating being registered at all three major credit reference agencies;
- Secured debts. It isn't possible to write-off debt that is secured on the family home. This is because a creditor can repossess a property and recover their money that way;
- Negative publicity. Going bankrupt will mean that an advert is placed in both the local paper and London Gazette. Debt solutions, such as an Individual Voluntary Arrangement or a debt management plan, can help avoid this unwelcome scenario;
- Borrowing money. Defaulting on a credit agreement will result in a bad credit rating. This serves to make borrowing money more difficult in the future. The best case scenario is that borrowing money will result in a higher rate of interest than before;
- Loss of career. A bad credit rating can make it impossible to continue with certain careers, including legal and financial services.
Many consumers already have a bad credit rating because they have missed or made late payments on personal debt. When this is the case, using a debt solution to write-off debt and free-up money for household bills is a sensible option. Always consult a qualified debt counsellor before proceeding with a debt solution.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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