Benefits of Debt Consolidation
For many people, the recession has bitten deep. Whether or not we’re experiencing a double-dip recession or ongoing period of stagnant growth, the reality is that many people are struggling still with a toxic combination of high personal debts, unemployment, the effects of high inflation and even more serious situations such as impending bankruptcy.
Current interest rates may be low, but customers on existing loans and credit card deals or mortgages will not likely feel the benefit – many will still be paying expensive interest rates on legacy deals dating back to the economy’s booming period. Many more people have been forced to apply for bankruptcy, enter into IVAs or take on debt consolidation plans to manage their financial difficulties.
Various high street and advertising companies offer IVAs, debt management and debt consolidation alongside bankruptcy services. However, the range of provider agencies can vary wildly in their service offered and goals. Some may promote their lack of paperwork or ‘complex’ jargon when it comes to IVAs, bankruptcy or debt consolidation products – however some of these companies may be unscrupulous – these services all require careful and informed consideration on their relative merits before a customer enters into a potentially more expensive deal. For example, a debt consolidation scheme is a better approach for customers seeking to manage problem debts before they escalate.
Unscrupulous agencies may offer products that actually cause an individual to be in more serious longer term debt. This can occur where advertised low rates are misleading, only available to a small minority of customers, or quoted on a non-annual basis (for example monthly.) Very long repayment plans will also add more to the repayment sum.
Customers must seek out accurate, quality advice, tailored to their situation. Each financial support scheme offers pros and cons. For example, a bankruptcy offers a customer full discharge within a year, whereas an IVA will take five years to discharge. With an IVA, payments will be frozen, creditors prevented from making contact and the customer makes one monthly repayment to the administrator. Court action cannot be taken by creditors and the agreement is legally binding and private, whereas Bankruptcy is public. However, IVAs require equity release, minimum debt levels and asset forfeiture – and they damage credit ratings.
Bankruptcy can be voluntary or involuntary, when an individual can no longer meet their debt obligations. It’s a publicly announced scheme, discharged within a year. Assets are forfeited and individuals may find they can no longer practice their profession in some cases. Credit rating damage is common too. However, a bankruptcy is quickly discharged – within a year usually, allowing the individual to ‘start afresh’, albeit with the need to rebuild their assets and credit rating.
Perhaps the most favoured route of all is debt consolidation. Through a reputable agency, a person’s debts will be managed by the agency and replaced by a single low cost, fixed monthly payment. This will be over an agreed period of time and will give the customer peace of mind and ‘breathing space’ to get their finances in order. The debt consolidation plan is private and managed individually and it does not affect employment or assets, as long as the terms of the plan are adhered to. The repayment plan supersedes any previous outstanding credit balances, which prevents the worry of dealing with a range of escalating balances.
What is important, regardless of the scheme chosen for managing problem debts, is that the individual seeks reputable advice, ideally from a charity or government sponsored source. This allows impartial and expert advice to be given which is in the customer’s best interests. As an alternative, a recommended, trusted and reputable agency or company could be considered for approaching directly – look for business accreditations and financial advice quality marks and seek independent advice where necessary.
`
Looking to find the best advice on bankruptcy, then visit www.payplan.com to find the best advice on debt consolidation for you.
