Ways to help manage your debt
It pays to do your research on the different ways you can manage your debt – as it could save you money in the long run. Whichever option you choose, try to deal with your most urgent debts now – things like your rent or mortgage payments, and council tax. These are called priority debts. Not paying them could mean huge penalties, such as having your home repossessed, or possibly even a prison sentence. We’ve listed some of the ways you could manage your debt.
Debt consolidation loan
As we’ve mentioned, a debt consolidation loan is where you take out one large loan that pays off your existing debts. It’s usually arranged by you through a bank. These types of loan are usually used to pay off credit card and other personal loan debts.
Debt management plan
This is a plan between you and your creditors to pay off all your debt. It’s an agreement that’s arranged through a debt management company. Generally, but not always, your creditors will freeze the interest and penalties so that you can begin to reduce your debts more quickly.
You can apply to the county court for an Administration Order if your debts are under £5,000 and you have a county court judgment (CCJ). You don’t need to pay a fee to apply and the court decides what you pay back, depending on your income.
Individual Voluntary Arrangement (IVA)
An IVA is an agreement you make with your creditors through a court. You’ll need to set this up through an insolvency practitioner. This is a formal, legal debt solution, so if you don’t keep up repayments, you can be made bankrupt.
For more information on debt and ways to manage it, you can contact Citizens Advice.