Families struggling financially have plenty of options to help them clear their financial arrears, such as a debt consolidation loan or an Individual Voluntary Arrangement IVA).
However there are advantages and disadvantages to each debt solution so it may be worth seeking advice and using a price comparison site, such as Money Expert, to find the one best suited for your circumstances.
Some of the advantages of a debt consolidation loan include:
• Those with a monthly income will be able to pay off their debt quickly as the interest will be lower on the loan than on the outstanding balance.
• The debt is managed into affordable repayments, which are lower than the ones you would be paying on your debt.
• Your creditors will stop hassling you as they will be paid off with the debt consolidation loan, helping you achieve peace of mind.
• It can also help you rebuild your credit rating so long as you make all the repayments.
There are some drawbacks to a debt consolidation loan such as:
• The debt will take longer to pay off as the monthly repayments are lower.
• It can be difficult for someone to obtain if the person has a poor credit rating.
• Not all of the debt may be covered by the loan so they may be some creditors left to pay off.
Therefore, it is wise to seek debt advice before committing to anything.
Another way in which families can stay in control of their money is through budgeting, which a debt consolidation loan can help with.
Richard Sorsky, money advice co-ordinator at the UK Insolvency Service, said: "Use a budget planner, get your bank statements out, sit down for a good hour and see exactly what purchases are necessary this month.
"Put them into a certain box and then work out what you've got for clothing and what you've got for incidental expenses."
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