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Struggling with debt? Whether you're looking to consolidate what you owe, set up a manageable repayment plan, or explore formal debt solutions, we'll help you find the right option for your situation.
MoneyExpert helps you understand your options and find the right debt solution for your circumstances. Whether you're considering consolidation, a debt management plan, or a formal arrangement like an IVA, we'll match you with the right support.
Debt consolidation means combining multiple debts into one single payment, usually at a lower interest rate. It's one of the most popular ways to take control of what you owe, and there are two main ways to do it.
A debt consolidation loan lets you pay off existing debts and replace them with one monthly repayment. This can reduce your interest rate and simplify your finances. Compare debt consolidation loans to find the best rate for your circumstances.
If most of your debt is on credit cards, a balance transfer credit card lets you move it to a new card with 0% interest for a set period. This can save you money while you pay down the balance faster.
Combining your debts into one monthly payment can make them easier to manage. You may be able to reduce your interest rate, lower your monthly outgoings, and have a clearer timeline for becoming debt free.
A debt management plan (DMP) is an informal agreement between you and your creditors to repay your debts at a rate you can afford. It's a good option if you're struggling to keep up with multiple repayments but want to avoid formal insolvency.
A DMP consolidates your monthly payments into one affordable amount, which is then distributed to your creditors. Interest and charges are often frozen, meaning more of your payment goes towards clearing the actual debt.
A DMP could be a good fit if you have a steady income but can't meet your current repayments. It won't affect your credit file as severely as an IVA or bankruptcy, but it will still show on your credit history for six years. For free, impartial DMP advice, visit StepChange.
An IVA is a formal, legally binding agreement between you and your creditors to repay a portion of your debt over a fixed period, typically five years. Any remaining debt is written off at the end.
An insolvency practitioner sets up the IVA on your behalf and negotiates with your creditors. You make one affordable monthly payment for the duration of the agreement. Creditors cannot chase you for payment or add interest once the IVA is in place.
The key difference is that an IVA is legally binding and can result in a portion of your debt being written off, whereas a DMP is informal and requires you to repay everything you owe. An IVA has a more significant impact on your credit file but may be the better option if your debts are substantial.
An IVA can stop creditors from chasing you and freeze interest on your debts. You make one affordable monthly payment, and any remaining debt is written off when the arrangement ends.
Getting help with your debt is straightforward. Here's what to expect.
Answer a few simple questions about what you owe and your current situation.
A debt specialist will review your circumstances and explain your options.
Choose the approach that works best for you, with no obligation to proceed.
The right approach depends on your situation. If you have multiple debts at high interest rates, consolidation is often the most cost-effective option. If you're struggling to meet repayments, a DMP or IVA may be more appropriate. The key is to act early and seek free advice from a service like StepChange if you're unsure.
Insolvency is when you can no longer afford to repay your debts as they fall due. It doesn't automatically mean bankruptcy. There are formal insolvency solutions such as IVAs and debt relief orders that can help you manage the situation without going bankrupt.
Bankruptcy is a legal process that writes off debts you can't afford to repay. It's usually a last resort as it has serious consequences for your credit file, assets, and ability to obtain credit in the future. It typically lasts one year but the effects can last much longer.
No. Both are formal insolvency solutions but they work differently. An IVA is a private agreement with your creditors to repay a portion of your debt over a fixed term. Bankruptcy writes off your debts entirely but is more severe in its consequences, including the potential loss of assets such as your home.
You can set up a DMP through a free debt charity such as StepChange, or through a commercial DMP provider. They will assess your income and outgoings, work out an affordable monthly payment, and negotiate with your creditors on your behalf.
The length of a DMP depends on how much you owe and what you can afford to repay each month. Most DMPs last between five and ten years, though this varies depending on your circumstances.
A DMP can cover all of your non-priority unsecured debts, such as credit cards, personal loans, and overdrafts. Priority debts such as mortgage arrears, council tax, and utility bills are handled separately and should always be paid first.
No. A DMP is not legally binding, which means creditors are not obliged to accept it or freeze interest. However, most creditors will cooperate as it's in their interest to recover the money owed.
Missing a payment can put your DMP at risk. Your creditors may withdraw their agreement, restart interest charges, or begin chasing you for the full amount. If you're struggling to keep up, contact your DMP provider as soon as possible to reassess your payment plan.
It is possible but difficult. Most lenders will see the DMP on your credit file and consider you a higher risk. Taking on new credit while on a DMP is also generally discouraged as it can make your situation worse. Speak to your DMP provider before applying for any credit.
It's unlikely while your DMP is active. Most mainstream lenders will decline applications from people currently on a DMP. Once your DMP is complete and your credit file begins to recover, your options will improve, though you may need to wait several years before qualifying for a competitive mortgage rate.
An IVA stays on your credit file for six years from the date it was registered, even if you complete it sooner. This can make it harder to obtain credit, a mortgage, or even certain jobs during that period.
In most cases, no. Debt collectors do not have the legal right to take money directly from your bank account without a court order. However, if a creditor obtains a county court judgment (CCJ) against you, they can apply for an attachment of earnings or a third party debt order to recover what is owed.
