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If you are in debt there are systems in place to help you get back on your feet again and gain control over your finances.
The first step is to calculate exactly how much money you owe, how indebted you are to each debtor, and the take into account your current income, plus any savings if you have any.
Once you have established the gap between outgoings and income this will help you focus on the best debt management plan for you.
Budgeting
If your debt is not out of control and you feel that with some strict budgeting you could administer the debt via your income without the need for any other measures, then this is always the best course of action to take. Many loans charge high interest rates, which mean you are essentially borrowing more money. However, if the interest on each of the debts is higher than that of a personal loan, consider whether it is cheaper to clear them with one loan and pay off the loan instead. A prepaid credit card could be a useful product to aid budgeting, whatever your choice of debt management is.
Debt Consolidation
As suggested above, this solution is useful for when each of your debts are acquiring more interest making them harder to pay off each month. A debt consolidation loan can consolidate all your debts so you only have to pay one monthly bill. It is advisable to compare the market for the best debt consolidation plan as interest rates differ, and to only borrow the minimum to try and pay it back as quickly as possible so the interest on the loan does not build up.
Debt Management
A debt management plan is where a non-legal agreement is set up between the debtor and his creditors and is only viable if he is able to pay off some of the debt each month. This allows greater flexibility with your payments and as it is not formal neither party needs to continue with the contract if circumstances change.
Fast House Sales
This option is suitable if you are a homeowner and your debts are so large you could be facing repossession or bankruptcy. If you have equity tied up in your home you can sell it through a sale and rent back scheme so you can access the funds to rid your debts and start saving again. Most companies enable the homeowner to stay living in the house after the sale and rent it back with the added option of buying it back off the company if you become able to do so.
Bankruptcy
This is the last resort and is ultimately what all other debt solutions try and help the debtor avoid. Though being made bankrupt will severely affect your ability to borrow money in the future it is also good at relieving the stress money problems will have had had a hold over you. Always try and apply for an IVA before voluntarily going bankrupt, but if this is not possible bankruptcy can rid all your debts immediately.
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