Personal Debt Help – Why to Look at IVAs, Trust Deeds and More
The number of people struggling with debt has been on the rise over the last few years. With the more extensive use of credit cards, car finance and loans, it’s no surprise that people can sometimes get out of their depth when it comes to repayments.
For millennials, problems with debt are quite common. So many young people leave university with large amounts of debt, and trying to get on the property ladder can seem like an impossible task. Sometimes these problems might lead to people seeking out more loans or putting off payments which can make the situation worse.
Why Do People End Up in Debt?
There are so many reasons why someone could end up with debt problems. They could range from small transactions which build up, to large loans which you can’t pay back. Here are a few examples which could lead to someone being in debt:
- Having a student loan
- Taking out a bank loan
- Having a car on finance
- Using credit cards and catalogs
- Mobile phone contract
All of these things can be helpful. If you want to spread costs, providing that you keep up with regular repayments. If you fall behind on paying your creditors, this is when you can find yourself struggling with personal debt. It’s advisable that you seek help. Or get advice on how to manage your debts if you do see that you’re having difficulty.
Solutions for Personal Debt
If you do end up with debts and you don’t know how to pay them back, there are a few options you could look into it. A debt advisor will usually be able to help you find a solution which suits you best. Some factors can affect which method works for you, including your assets, whether you own a home, and other personal circumstances. Below are some of the most common solutions for personal debt.
IVA – Individual Voluntary Arrangement
An IVA is an agreement made between yourself and the creditors that you owe money to it. It’s available for residents of England, Wales, and Northern Ireland. It gives you the opportunity to pay back your debts over time in monthly amounts that you can afford. Usually, you will need to have at least £7000 of unsecured debt to enter into an IVA
An Insolvency Practitioner will be able to help you set up an IVA if you feel this is the right choice for you. They will deal with the creditors on your behalf and work out a monthly repayment which is suitable for you and your circumstances. It can take a lot of pressure off you as your creditors won’t be able to contact you or ask you for money. Once your creditors agree to the IVA, you will pay back a set amount each month. If you have more than one creditor, the monthly sum will split between them all. This arrangement will usually last for five years, and any debt not paid back after that time will be written off. Do be aware that entering into an IVA will affect your credit rating for six years from the start date of the agreement.
Trust Deed
A Trust Deed is a similar debt solution to an IVA; however, it’s only available to residents of Scotland. It follows the same kind of structure whereby your Insolvency Practitioner arranges repayments from you to your creditors. Usually, the Trust Deed will last for four years, and any remaining debts will be written off after this time.
To begin a Trust Deed, you will need to have at least £5000 of unsecured debt, and your creditors must accept the agreement before it can start.
Debt Management Plan
Another option to consider is a Debt Management Plan, also known as a DMP. It’s another way of making your repayments more affordable and making your finances easier to manage. The main difference with a DMP is that it lasts until the debt is repaid in full. There is also no guarantee that interest and charges will be frozen by your creditors.
It’s important to look into these different options in detail and make sure you choose the right one for you. What works for one person may not work for another. Help from an advisor might make it easier to make the right choice to remember to get advice where you can.
What to Do Next
If you’re in a situation where you’re finding it hard to manage debts, it’s important to get some advice as soon as possible. For young people, money worries are incredibly common. And having unpaid debt hanging over your head makes the situation even harder.
Depending on the amount and type of debt you have, there are plenty of options available which could help you manage your finances more efficiently. Whether you are dealing with relatively small amounts of money or more significant repayment. There will be a solution to make things easier. You are indeed not alone. And trained advisors can point you in the right direction.
