Debt Management Plan, IVA or Bankrutpcy

Ok, you have taken out a loan or two, you were managing fine (sort of) until one day, thump!, redundancy hits, you are now looking for work but nothing is going your way.

3 months down the line, your credit cards are maxed to cover the loans, you are struggling to make ends meet and the loan/credit companies just don’t seem to care!!!!

5 months in, still no job, you don’t sleep, you have enough chasing letters to build a house (which you think might come in handy when i lose mine!!)

What are the Options?

Talk to the credit card and loan companies and ask if you can freeze the interest and pay back a reasonable amount until you are back on your feet, but, if they won’t listen and threaten debt collection then some of your options are;

Debt Management Plan

This is where a Debt management company will help you compile a list of all the people you owe money to and send a letter/email to each one asking if you can pay a reduced amount until the debt is paid off. Seems like a good option, but no, the CC/Loan companies are not bound to agree with your terms and will still come after the debt, mainly because of 3 reasons

1. a DMP is not legally binding by either party
2. the CC/Loan companies won’t accept the low monthly repayments offered
3. the CC/Loan companies know that these plans are mostly abused by people who will just continue to rack up more debt and they’ll never get paid

My advice is, unless you can offer approx £20 per month to each CC/ short term loan company as repayment and don’t take out any other loans, then they won’t stop coming after you with debt collection.

Also beware, if you do take out a DMP, make sure you are not charged a fee for setting it up!!!!

IVA

An Individual Voluntary Arrangement ( IVA ) is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors.

IVA’s are better because they are binding and give you and the CC/Loan companies confidence that you are prepared to at least pay off the debt in time, you will work with the IP to come up with a repayment plan and if the CC/Loan companies agree to it, you pay of one fee per month and they stop chasing you for the debt.

Your IVA can be cancelled by the insolvency practitioner if you don’t keep up your repayments. The insolvency practitioner can make you bankrupt.

You may still be able to keep your business running, if you have one.

Bankruptcy

When all else fails, do this only as a last resort. Although this will wipe your debts in one go you will have this tag around your neck for 6 years so when you are back on your feet a year later and you apply for a contract mobile phone, a credit card, a mortgage, a home catalog or even Sky tv, forget it, you have a worst credit rating than ever before.

Any credit you apply for for the next 6 years will be at 20 times + the % rate people with half decent credit ratings will pay, so you will pay more in the long run.

My advice (which is easier said than done)

1. Don’t take out credit, if you can’t afford it with the cash in your hand, don’t buy it.
2. If you are in difficulty, speak to your CC/Loan company to arrange to pay it back bit by bit, but don’t take the p**s and offer £5 a month, because they won’t listen to you.
3. If you can’t afford or they won’t listen, skip the DMP and go for an IVA if you are in that much trouble. Your credit rating will be in the toilet for a while, but your life will carry on as normal and creditors will take into account that you are willing to pay them back albiet slowly
4. Avoid bankruptcy, it will cost you more in the long run

This is my opinion only, if you are in debt, For help, go to moneyadviceservice.org.uk

We all need an influx of cash from time to time. What are your short term loan options? The question is, how do we get the cash that we need? There are all sorts of loans available to people with all kinds of credit ratings. You don’t have to miss out on a loan because of bad credit anymore. Let’s take a look at some of the options.

Installment Loans

An installment loan or short term loan can be described as a loan for which there are a fixed number of payments to be made over a predetermined period of time. Many different types of loans fall into this category – from auto loans and mortgages to some personal loans and more. The thing about the big financial institutions likes banks, is that they require a lot of paperwork and you have to have relatively good credit to get them. What if you don’t have good credit? What if you need an amount of money that is too small for most banks to consider? What if you know what you need the money for and you need it right now?

In fact, figuring out the use of your monthly installment loan shouldn’t be that difficult. You probably know why you need the money as soon as you know you need it. The question is, what type of loan do you need? You need to determine this before you go any further.

Payday Loans

Everyone should know by now that payday loans can be dangerous, and in fact, they are known to be predatory. Payday loans are loans that have a short duration coupled with high rates of interest. Typically, they will need to be paid back on the very next payday of the borrower… which can lead to the borrower not being able to make ends meet and having to go through the process all over again.

Debt Consolidation

Some people look to get loans in order to consolidate their debts. This can be a good thing and can even give their credit score a boost in the process. The question is whether or not you need a secured or a short term loan to consolidate your debt?

When you need to borrow some cash, you have several short term loan options. These options include things like borrowing from family or friends (which should always be a last option), getting a cash advance from one of your credit cards, getting a traditional loan from a financial institution such as a bank or credit union, getting a payday loan, or getting an installment loan.

Secured Loans

If you go to a bank, they tend to offer two options for loans – secured and unsecured. A secured loan is a loan that needs to have a form of collateral. This could be the deed to your home, as is the case with mortgage loans. If you default on the loan, the collateral will become the property of the lender. One of the benefits of a secured loan is that you can claim the interest that is associated with it as a tax write-off.

Short Term Loans

Unsecured loans typically don’t need any sort of collateral and this is what most short term loans are. You are able to get the money you need and then pay it back in a short period of time. The rate of interest might be a bit higher on these because the lender is taking more of a chance since there is no collateral.

Direct Lenders or Brokers?

Be careful when landing on a broker short term loan page as there may be hidden charges, some brokers will charge you for just finding you a loan!! Short term loan direct lenders are the safest bet, or brokers who do not charge you for their services

What to Look For

Anytime you need a loan of any kind, there are some things that you need to look for when you are researching your options. One of those things is the quality of the lender. Knowing that you will be dealing with a lender that is qualified as well as compliant with all regulations can give you a significant amount of stress relief, especially if this is your first time borrowing.

You also need to look at the total package and the terms. Whether or not you are the type of person who likes going through all of the legal jargon, you really should compare all of the fine print for any loan you are considering. You need to know exactly what is involved and what the penalties will be if you make a late payment or default on the loan.