Debt Consolidation is the last resort before bankruptcy for many of us. What we need to know are hard facts about the types of debt consolidation, and how they can affect us personally.
The most obvious debt consolidation would be in the form of a loan. These can be an ideal choice if you are in a situation where you can afford to pay the loan repayment and all the added interest on top. Unfortunately for many, this is not an option.
So, moving onto FREE Debt Consolidation. The debts that you owe including credit cards, store cards and any unsecured debt will be added together.
Once your status has been established, you may be offered an IVA (individual voluntary arrangement) or a DMP (debt management plan).
An IVA is a legally binding agreement which is paid over a fixed period of time. After that time period, any debt that remains is written off.
If you are advised to go for an IVA, you will need to sign a letter to the company who is dealing with your free debt consolidation. This will allow them to negotiate with your creditors on your behalf. You will have to include all unsecured creditors in the agreement. Any secured payments you have, for example a mortgage, will still have to be paid as normal by yourself outside of the agreement.
This type of free debt consolidation normally lasts for 5 years. This means that if you were to sell all of your assets that you own, the amount raised would not cover the amount of debt you have incurred.
The other free debt consolidation is a DMP. Initially it works the same way as an IVA. You make a list of your creditors and what you owe, and the company who is offering free debt consolidation will make reduced offers of payment to your creditors on your behalf.
There is never any guarantee that the creditors will accept the reduced payment put forward, but the free debt consolidation company should know what a reasonable and acceptable amount would be purely by experience.
There is no set period of time that the loan should be paid back. It all depends on the size of your debt and if your creditors are prepared to freeze the interest and charges on your debt.
The same as the IVA, all unsecured creditors should be included in the DMP. Secured loans will need to be payed as normal.
Some DMP providers do charge a fee, so you need to check upfront that you are getting FREE debt consolidation.
Lastly, you need to remember that any missed payments could jeopardise the whole arrangement. The whole arrangement is based on confidence that you will meet the new reduced payments. If you do miss, your creditors could add interest (exactly what you are trying to avoid)!
The most obvious debt consolidation would be in the form of a loan. These can be an ideal choice if you are in a situation where you can afford to pay the loan repayment and all the added interest on top. Unfortunately for many, this is not an option.
So, moving onto FREE Debt Consolidation. The debts that you owe including credit cards, store cards and any unsecured debt will be added together.
Once your status has been established, you may be offered an IVA (individual voluntary arrangement) or a DMP (debt management plan).
An IVA is a legally binding agreement which is paid over a fixed period of time. After that time period, any debt that remains is written off.
If you are advised to go for an IVA, you will need to sign a letter to the company who is dealing with your free debt consolidation. This will allow them to negotiate with your creditors on your behalf. You will have to include all unsecured creditors in the agreement. Any secured payments you have, for example a mortgage, will still have to be paid as normal by yourself outside of the agreement.
This type of free debt consolidation normally lasts for 5 years. This means that if you were to sell all of your assets that you own, the amount raised would not cover the amount of debt you have incurred.
The other free debt consolidation is a DMP. Initially it works the same way as an IVA. You make a list of your creditors and what you owe, and the company who is offering free debt consolidation will make reduced offers of payment to your creditors on your behalf.
There is never any guarantee that the creditors will accept the reduced payment put forward, but the free debt consolidation company should know what a reasonable and acceptable amount would be purely by experience.
There is no set period of time that the loan should be paid back. It all depends on the size of your debt and if your creditors are prepared to freeze the interest and charges on your debt.
The same as the IVA, all unsecured creditors should be included in the DMP. Secured loans will need to be payed as normal.
Some DMP providers do charge a fee, so you need to check upfront that you are getting FREE debt consolidation.
Lastly, you need to remember that any missed payments could jeopardise the whole arrangement. The whole arrangement is based on confidence that you will meet the new reduced payments. If you do miss, your creditors could add interest (exactly what you are trying to avoid)!
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