If you’re having problems making payment of all your outstanding debt, and are looking for ways to consolidate debt, why not consider consolidating your debt using one of the following common debt consolidation methods:
Consolidate Debt – Credit Card
If you have more than one credit card, chose the credit card that has the lowest annual percent rate and annual fees (look at the APR rate quoted) and then consolidate all of your credit card debt on the one card. If you consolidate debt onto one credit card, you’ll find it much easy when it comes to time to make your monthly repayment.
Consolidate Debt – Personal Loan
If you still have a good enough credit rating to obtain an unsecured personal loan from you local bank, you could find this a useful tool to consolidate debt as, although you still don’t offer any security over the outstanding debt, you’ll likely find that the interest rate is much less than as a consolidate consumer debt – say in the form of store cards or credit cards, which are much more expensive to fund.
Consolidate Debt – Home Loan Refinance
A home loan refinance is where you ask a lender to lend you money in return for you providing the lender with a mortgage. The proceeds of the loan can then be used to pay off your existing home loan, with the excess used to pay off your outstanding debt. All of your debt will then be consolidated debt in the form of a home loan refinance.
Consolidate Debt – Second Mortgage
Another way where you can use the equity in property to consolidate debt is by means of a second mortgage. Unlike a home loan refinance, when you consolidate debt by means of a second mortgage you are not looking to repay your original home mortgage lender but are providing a new lender with a second rank mortgage over the equity in the property. As with a home loan refinance, choosing to consolidate debt with a second mortgage will, most likely, mean that you have less interest to pay to service your debt as you have provided the lender with security in order to consolidate the debt that was previously unsecured.
Consolidate Debt – Equity Lender
One final, and some would argue risky, means to consolidate debt is to borrow against equity and then use the proceeds to repay your outstanding debt, leaving one larger consolidated debt to be repaid. Equity loans work by allowing the debtor to borrow against investments; such a mutual trusts, shares, pension fund payments, etc. Again, though, this is often a criticized means to consolidate debt as it offers few additional advantages, beyond immediate rest-bite from your creditors, whilst risking your economic future. Nonetheless, there are a number of people who would prefer to consolidate their debt in this manner rather to consolidate debt by means of a second mortgage or home loan refinance.
At a time when consumer debt reaches records levels, housing prices reach ever new highs, and education costs spiral, each and every one of us needs to keep a very careful eye on our debt management. After all, in nearly all cases of personal debt, if interest rates were to rise by 1 percent across the board, we would no longer be in a position to manage our debt levels. What should you be doing though if the amount of your debt has already exceeded your debt management capabilities? In other words, you no longer have the means to service your day-to-day debt? If this applies to you, the first thing you need to be aware of is not to feel too guilty about this; it applies to more people than you may think. The second, and more important, thing you need to consider, quickly, is what of the debt management programs you need to be adopting.
Successful Debt Management Programs
Step 1: Stop Creating More Debt
Having come to terms with the fact that your debt is now at unmanageable levels, in order to be able to implement a successful debt management program, you need to understand that arranging to repay your existing outstanding debt, by means of one of the successful debt management programs, is not going to be as easy as it was to obtain the debt in the first place. Consequently, you need to stop making any more debt – now! So, put those credit cards away in a safe place, where you cannot get to them too easily, but hold off cutting them up at this time – you never know, you may just need them again in the future.
Debt Management Step 2: Where’s The Money?
The second step you need to take in order to implement a successful debt management program is to find out where you are spending your income. Unfortunately, one thing your level of debt will clearly show is that you have been living beyond your means. Clearly, in order for your debt management program to succeed, this is going to need to change. In order for the debt management program to stand a chance, you now need to reign in your belt, find out where you are overspending, and to cut back on this expense. You should also keep in mind that if you are going to implement a successful debt management program, it is extremely likely that you are going to need to find another form of revenue with which to service your debt levels – so start looking for ways to earn some extra pocket money!
Debt Management – Step 3: Talk With Your Creditors
If you believe your debt has now got to such extreme levels that you’ll not be able to meet the minimum repayments on your debt, you need to arrange to manage your debt repayment with your creditors as soon as possible. Here, you’ll usually find that creditors are fairly understanding people. It’s not that they want to see you in court – far from it. What creditors want is for your to be honest about your debt and to enter into a debt management program with them whereby all creditors, and you, know that all that must be done to manage your debt levels is being done.
Debt Management – Step 4: Obtain A Credit Repair Report
Once you have implemented one of the successful debt management programs, the time will come for you to obtain a credit repair report to see the level of damage that you have done to your credit rating. Once you the credit repair report, review it very carefully to see if there are any inaccuracies or errors. If there is an error, make sure you report this and put it right.
A trust deed is employed in Scotland and is a voluntary but legally binding formal arrangement between a debtor, a trustee and their creditors. A debtor, an individual who often has a very large sum of debt they need to clear, volunteers to transfer their assets to a professional Insolvency Practitioner, known as a trustee. It is then the responsibility of the trustee to administer these assets between the creditors.
A Trust Deed represents an alternative to sequestration and is a far less formal process. It can also enable individuals to avoid some of the legal aspects which follow from being made legally bankrupt, as is the case with sequestration.
Advantages of a Trust Deed
The main advantage of a Trust Deed is that it lessens the stress on the debtor. Because all correspondence and creditor queries go through the trustee, the debtor is no longer forced to deal with them all. Therefore, a trustee needs to be someone who is dependable and reliable.
It gives the debtor control over the situation rather than the creditors. A Trust Deed is also a much cheaper and far more flexible option than segregating your assets to pay off your creditors.
As long as specific requirements are met, a Trust Deed is able to be documented in the Registrar of Insolvencies and deemed ‘protected’. This means that all creditors, whether they agreed to the terms or not, are unable to petition or try any other method to retrieve the money that is owed to them, as long as the debtor adheres to the Trust Deed terms.
The duration of a Trust Deed is fairly short compared to many debt management options and the debtor will be free from their debts approximately 3 years after the date it was granted.
Disadvantages of a Trust Deed
Once a Trust Deed has been granted, but not ‘protected’ it only binds those creditors who agreed to the terms and therefore it means than any other creditors will still need to receive their payments. Therefore, those creditors not bound by the Deed are still able to petition for the debtor’s sequestration. As a result, if a home owner is unable to pay their unbound creditors in full via another source they may be forced to sell.
One condition of your Deed becoming ‘protected’ is considers all of your property, and any property the trustee holds may be sold by them should it be in the interest of the creditors. Your trustee is also able to file for your sequestration if you are unable or unwilling to co-operate with them. Additionally, it may appear that your trustee is working with your creditors best interests in mind as they are able to sign for your petition if they feel it would be a better option for them.
Going through the process of a Trust Deed will result in the debtor being unable to hold the Director position of a limited company, additionally; several other public offices shall also be off limits.
For help with getting a trust deed please contact us here
Are you in the position where there is a chance of losing your home or your car? Perhaps you’re falling behind with settling your bills, debt collectors are knocking on your door and creditors are harassing you for payment…
Take heart. You are not the first (nor the only) person facing such a financial crisis. Regardless of whether your current situation was caused by job loss, sickness or overspending- being in this position can seem to be a long, dark road with no end or solution in sight. The reality is that this state of affairs can be overcome and that your situation does not have to deteriorate any further.
One of the first things you can do to bring matters under control is to take a hard-nosed look at your cash flow- how much money do you bring in and how much money is flowing out? Write down your total income from all sources combined, and then make a list of all your fixed expenditure (Expenses that do not vary from month-to-month such as repayments on your vehicle, insurance premiums, mortgage payments etc.) Next item would be variable expenditure and here you’d include all expenses that are not fixed (like dining out, entertainment, clothing, etc.)
Do not neglect any item of expenditure, even if it’s a small amount. Be as precise as you can. This will give you an immediate and exact overview of where your money is going to every month. Obviously, there are the indispensible expenses and those are priority number 1. Assign priority scores to the rest of the items. The object of the exercise here is to be sure that all of the basic necessities like food, your house, health, children’s education, insurances, etc. are covered.
You will find a wealth of information on budgeting and managing your money in libraries and bookstores as well as on the internet. There are also plenty of computer programs available that relate to money management. Most have ready-made features to set up and maintain a budget, keep track of your check book, bank account’s and credit cards.
Many people are reluctant to do the following, for very obvious and understandable reasons: If you find yourself in a financial tight spot and unable to make all payments contact your creditors immediately and inform them that you are having difficulty meeting your scheduled payments and inform them of your reasons for having this problem. Most will be happy to co-operate with you and to revise your repayment commitment to a level that is achievable. Do not wait until your account is seriously in arrears and you face having to now deal with a debt collector. If that point has been reached, it means that the creditor has abandoned hope of finding a settlement with you and has resorted to handing over your account to a debt collector.
A good credit counsellor will be able to assist you with quality advice on money management and coping with debt, as well as guide you through setting up a budget and most often offer educational materials and workshops. Trained and certified debt counsellors are knowledgeable on subjects like credit, debt and money management. A good counsellor will sit down with you and do a detailed analysis of your financial situation, with a view to developing a personalised program to solve your financial difficulties. You can expect the initial consultation to last for about an hour. Follow-up sessions may also be suggested.
Each of us knows the feeling: it’s month end, we have a handful of bills to pay, have to go to several different banks and post offices to pay them, and all the time we are worried that we’ll pay the wrong amount to the wrong creditor. If only we could arrange our debt management a little better, our lives would be just so much easier. But, the fact is that your debt management need not be overly complex; provided that you arrange the management of your debt in a sensible way. The following are some useful tips on how best to control your debt management:
1. Debt Management – The Standing Order
Nearly all creditors will allow you to make a monthly standing order payment to repay their debt. Although paying your debt by means of a standing order doesn’t mean that you reduce the number of creditors you have, it does make the day-to-day running of your debt management so much easier.
2. Debt Management – The Direct Debit
Like the standing order, the direct debit is a monthly payment that you agree to make to your creditor. However, unlike the standing order, a direct debit is not for a fixed amount each month; but, rather, is for all outstanding debt you have as of the day the direct debit is due. As such, direct debit debt management is not particularly popular, it’s seen as messy – and if the creditor takes more than you accounted for, it becomes very difficult for you to survive the remainder of the month on the money you have left.
3. Debt Management – Online Banking
A very popular method of debt management these days is to open an account with a bank that lets you do all your banking and debt management via the internet. This way you can arrange to pay all your bills on time, without having to leave the comfort of your home or office, whilst still having control over the debt management process.
4. Debt Management – Reduce The Number Of Creditors
If part of your debt management problem is the sheer number of creditors you have, why not think about reducing this number of creditors by means of consolidating your debt. For example, if your have 3 credit cards, why not just make this one credit card debt by paying off the other 2 credit cards using the balance on your third card? Alternatively, depending on the level of savings you may obtain, why not consider paying off your credit cards altogether by asking your bank to provide you with a personal loan. Then all you need to do is to arrange to pay off your bank.
As you can see then, debt management strategies do not need to be too difficult, you just need to give some thought as to how best to arrange your debt management. In this regard, it is probably best that you do not arrange your debt management program where you are walking around the high street at the end of the month with an envelop full of money trying to find the easiest way to pay back each of your creditors!
IVA stands for an Individual Voluntary Arrangement and enables a person with financial difficulties to put into place a legally binding payment plan in order to pay off outstanding debts. An IVA is settled between the individual in question and the people they owe money to, their creditors.
As an IVA is legally binding it can only be set up by a licensed professional known as an Insolvency Practitioner.
Applying for an IVA
Upon an Insolvency Practitioner agreeing that an Individual Voluntary Arrangement is suitable for you and your circumstances, you shall settle on an achievable monthly repayment amount. You will need to provide information concerning your current financial situation in order for this to be an appropriate amount that you shall be able to pay every month. Once this information has been agreed you shall be required to sign an official proposal.
An Interim Order shall then be applied for through the court by your Insolvency Practitioner. No creditors shall be able to take legal action against you once this order is in place, however you may be asked to attend a meeting with your creditors. However, this is very rare and you are usually only required to be contactable via telephone on that specific day.
At the creditors meeting, your individual creditors will be asked to vote for or against the IVA. It only takes one of your creditors to vote ‘for’ the IVA in order for it to be accepted. On the other hand, if only one creditor votes ‘against’ the IVA, and they represent 25% or more than your total debt combined then the meeting shall be classed as pending, and the creditors that did not vote shall be called to do so.
However, if the creditor that voted ‘against’ the IVA still stands for more than 25% of the total debt, despite the other creditors voting ‘for’ the IVA, then the IVA will be rejected. This is due to the fact that an IVA will only be granted if 75% of the monetary value of the debt is voted for. But, if the IVA is granted it binds all creditors, even those who did not vote.
Advantages of an IVA
Once your IVA is in place your debt charges and interest fees are frozen. This means that your creditors are no longer able to demand payments from you or continue to add interest and tax onto your debts.
Rather than struggling to pay monthly instalments to several creditors, an IVA enables you to pay one reduced amount a month. This amount gradually pays off any debt and typically lasts for five years.
The monthly instalments are calculated from the individual’s monthly income minus their expenses. Because an IVA is legally binding, unlike Debt Management Plans, if the monthly instalments are paid regularly for the duration of the agreed period, once this period comes to an end you shall be free from the debts, regardless of how much has been paid off.
Your financial position is reviewed regularly throughout the period of your IVA to determine whether or not your situation has changed. This is done in order to ensure that you are financially able to stay committed to the IVA.