Types of debt help

If you`re unable to repay your debts, you might find that the interest grows very quickly. For that reason, it`s important that anyone struggling to repay their debts finds a way to improve the situation.

If you`re struggling and want free professional advice, you can call our debt line on 0800 195 2911 to speak to an expert debt adviser about the best way to clear your debts.

In the meantime, here`s a quick guide to the help available to people struggling with debt in England and Wales.

What help is available for my debt problems?

There are a number of debt solutions available to people who are having problems. Three of the main debt solutions available are:

Debt consolidation loan

A loan big enough to pay off multiple existing debts, which you will then repay in single monthly instalments to your new lender. This can make your debts much easier to manage.

Debt consolidation can enable you to reduce your monthly outgoings by repaying the loan over a longer period than your original debts, meaning you`ll have more money left over to spend each month. However, this also involves paying interest for longer, so you may end up paying more in the long run.

Debt management plan

An informal arrangement that involves making reduced monthly payments to your lenders, based on how much you can afford to pay each month. This is very useful for people who cannot afford their existing payments, but would be able to repay the debt in full over a longer period of time.

In some cases, you may also be able to negotiate a reduction or a freeze in interest and other charges, which can prevent your debt from growing.

However, be aware that if you don`t agree a freeze in interest, you may end up paying more, as you`ll be paying interest for longer. It will also have a negative impact on your credit rating.

IVA (Individual Voluntary Arrangement)

A legally-binding arrangement with your lenders in which you will agree to repay a percentage of your debts, based on an amount you can afford, and write off the rest.

This usually takes place in the form of monthly payments over a five-year period. On successful completion, you will be legally debt-free.

An IVA is widely considered to be a preferable alternative to bankruptcy, as it avoids many of the potential downsides (such as losing your home or car). But keep in mind that it will have a similarly damaging effect on your credit rating, and this will severely limit your ability to obtain credit in the future.

How do I know which debt solution is right for me?

Here we`ve only given a brief description of each debt solution, but each has its advantages and disadvantages, and you should be aware of these before you make a decision.

Make sure you speak with a professional debt adviser before making any decisions. Your debt adviser can explain everything to you in detail, and help you decide which debt solution best meets your needs now and in the future.

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