With new figures suggesting that many of the people claiming Jobseeker's Allowance (JSA), debt consolidation solutions such as an IVA may be the best way for consumers to get on top of their finances.
According to the Consumer Credit Counselling Service, one in eight people who contacted the charity for debt advice in the first half of 2010 were claiming JSA.
The charity found that clients claiming the benefit typically owe £15,412 to five different creditors, with many even further in the red.
IVAs, or Individual Voluntary Arrangements, may be the best bet for many people in this category.
These agreements, which are arranged between consumers and their creditors by a broker, allow both parties to come to an agreement about what is a realistic plan for repayment.
Crucially for those in debt, an IVA can lead to reduced repayment levels and can also see the amount they owe significantly reduced, without them having to declare bankruptcy.
Creditors can also ensure that they receive some of what they are owed, something that is not the case when someone goes bankrupt.
With this in mind, here are a few things to keep in mind when considering an IVA for debt consolidation and management.
• IVAs are generally only available to those who have a minimum debt of £15,000 across three of more creditors. You will usually be expected to be able to pay an amount in the region of a few hundred pounds per month, based on the terms of your agreement.
• As long as you are able to stick to the agreement, you will usually be able to reduce your debts to zero in about five years in a way that is intended to be realistic and manageable.
• While you will be able to write of those debts that you are unable to pay back and can often reduce your total debts by a significant amount, taking out an IVA will affect your credit rating for a total of six years.
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