Debt Personal Solution

Posted on December 20, 2011 by Admin
Debt Personal Solution

Debt Personal Solution

Millions of families are finding it virtually impossible to cover household bills because of spiraling personal debts. According to national money education charity, Credit Action, UK consumers paid £76.2 billion in interest payments alone during the last 12 months. The average amount of interest paid by each household on personal debt was £3,124 during 2008.

How a Debt Solution Helps

  • Write off debt. A debt solution can be used to deal with unsecured personal debts, such as personal loans, overdrafts and credit card debt. Either going bankrupt or a Debt Relief Order allows someone with money problems to become debt-free in just 12 months;
  • Reduced monthly repayments. Debt solutions are designed to help people reduce repayments on personal debts in order to free-up money to help pay household bills;
  • Freeze interest and charges. A debt management plan often enables a debtor to freeze further interest and charges, although there is no obligation on the creditor to agree to this;
  • Prevents creditor harassment. A debt solution, such as an Individual Voluntary Arrangement or Debt Relief Order, means that creditor harassment is illegal once agreed. Whilst a debt management plan is only a voluntary agreement, creditor harassment is unlikely;
  • Greater options. It is possible to use a debt solution to manage personal debts under £15,000 or write-off debt over £15,000.

Negative Aspects of Debt Solutions

  • Bad credit rating. Starting a debt solution, such as a: debt management plan, Debt Relief Order or Individual Voluntary Arrangement, will result in a bad credit rating being registered at all three major credit reference agencies;
  • Secured debts. It isn't possible to write-off debt that is secured on the family home. This is because a creditor can repossess a property and recover their money that way;
  • Negative publicity. Going bankrupt will mean that an advert is placed in both the local paper and London Gazette. Debt solutions, such as an Individual Voluntary Arrangement or a debt management plan, can help avoid this unwelcome scenario;
  • Borrowing money. Defaulting on a credit agreement will result in a bad credit rating. This serves to make borrowing money more difficult in the future. The best case scenario is that borrowing money will result in a higher rate of interest than before;
  • Loss of career. A bad credit rating can make it impossible to continue with certain careers, including legal and financial services.

Many consumers already have a bad credit rating because they have missed or made late payments on personal debt. When this is the case, using a debt solution to write-off debt and free-up money for household bills is a sensible option. Always consult a qualified debt counsellor before proceeding with a debt solution.