The quicksand of debts gets more and more wet with every passing day and you feel stuck to the level of helplessness. No one wants to die like that so why your finances would prefer such death? Come in action, make some movement, try hard, you have to get rid of all this. Nothing makes you feel calm and happy when your financial situation is out of control. No vacation, no delicious food can distract you from the distress of downfall in money matters. Multiplicity and mounting of obligations add new chapters and causes of anxiety.
Certainly not for long, one can live like this; there should be some ways to control the untamed horse of debts. As each and every penny counts, similarly, each and every bit of solution can work to bring the betterment.
IMF’s Global Debt Database compiled the data of 190 countries on public private debt from 1950 to the latest addition of 2017. This data says that the world’s debt have exceeded $ 86000 in per capita terms. This is 2 ½ times more than the average income per-capita.
Oops, this means not only you but almost the whole world is in a financial fix. If individual situations improve, collective enhancement in finances is possible to achieve.
Some practicable ways to break the vicious circle of your debts
May be not all, but among the many ways some surely works for you. Know about them, check their compatibility with your individual situations, and make their best use.
Debt Management Plan
This ensures a smooth slip from debts. Get a workable debt management plan for you. But what is debt management plan? – An agreement between the debtor and the creditors to pay off all the debts.
- You apply for A Debt Management if –
- You can afford to pay only a small amount each month.
- You will be able to repay in a few months.
- You cannot afford to repay your existing unsecured debt repayments.
Pros and Cons of Debt Management Plan
|Gives mental peace as the moment you get registered for a debt management plan, the creditors stop sending letters and calls of warning.||It may take time to pay off all your debts if you have taken a paid service. The charge of DMP deducts from every payment or instalment you give. This increases the duration.|
|No more mounting interest rates as they are frozen on a fixed level and repayments are easier.||Debt management plan is considered as your undertaking to pay off the full amount.|
|Your credit score starts to improve if you do the timely repayments.||A debt management plan gives a bad impression about your credit worthiness. It shows that you took this plan because somewhere you were inefficient to pay it back.|
Individual Voluntary Arrangement (IVA)
Another tool to revive your finances. It freezes your debts and you need to pay back the obligation in a certain period. Any debt you owe after that period is then written off.
- Necessary Things To Apply For An IVA
- Apply for IVA if you are able to pay not completely but a certain amount of your debts.
- You should have a regular long-term income. This is necessary because the IVA covers at least 60 to 72 months.
- Having a lump sum amount to pay off the debts can also help you qualify for the arrangement.
Pros and Cons of Individual Voluntary Arrangement (IVA)
|Normally maximum period of IVA is 5 years. You can be debt free completely in a certain period of time||You cannot do any unsecured borrowing during the arrangement.|
|Single monthly payment||To get an IVA you need a minimum level or amount of debt as the obligation. Less than that stops you from qualifying for the obligation.|
|Protection from court action||You need to include all the creditors.|
|Repaired credit rating||Some employers do not allow people in IVA.|
Debt Relief Order
A debt relief order is a type of insolvency order that is suitable if you have a low income. It freezes the debt for one year and if your circumstances do not change then writes it off completely. You cannot qualify for a DRO if the debt amount is too high. You cannot apply for debt relief order if – 1. The creditors have applied to declare you bankrupt but the hearing has not taken place yet. 2. You are currently bankrupt. 3. You have applied for an Individual Voluntary Arrangement or already have one. 4. You have been given a debt relief restriction order.
- To apply for Debt Relief Order –
- You need to have a residence proof.
- Your debt should not exceed the certain amount that is set by the industry.
- Your surplus income per month after paying all the household expenses and living costs is less than £50.
Pros and Cons of Debt Relief Order
|The Cost of DRO is less and the complete deal is inexpensive.||As DRO is for low income people, homeowners are not eligible to apply for it.|
|After being approved for a DRO, creditors cannot take any legal action against you.||It is available only if the total debt amount is less than £20,000.|
|Become debt-free in a very short time that is usually one year.||DRO usually ends in one year but its impact on your credit rating remains at least for 6 years. During this time, it is very difficult to qualify for other loans.|
All the above ways rely a lot on your personal financial circumstances. Besides, there are some other ways too to get rid of debt. Bankruptcy, writing off your debts, administration order, offer in full or final settlement. All can be of use but with conditions apply, if you qualify for those conditions then fine otherwise move to next choice.
Having burden of multiple debts is worse than riding two horses at the same time. Find an escape window for yourself and work on your plans steadily. Make a commitment to yourself of a disciplined financial life to avoid any further mess. Description – Debts are deadly for financial health. Before they become even more destructive take an action and work on way outs and get rid of them permanently.