The bills are piling up and the interest on your credit accounts is rapidly increasing. Paying back your non-priority debts such as credit cards, loans, catalogue accounts and DWP debt isn’t a viable option. You have now reached a point where you can no longer manage your debt alone and you are looking at 3rd party debt companies who can offer you a more affordable solution.
You’ve probably heard about IVAs and Debt Management plans – both of these are offered by 3rd party debt companies and they both excellent solutions to unmanageable debt. If you are not sure, what the difference is between an IVA and a Debt Management Plan is, here is everything you need to know:
IVA
- Stands for ‘Individual Voluntary Arrangement’
- A formal agreement to repay creditors a more affordable amount
- All interest and charges on debts included in the IVA are frozen
- No upfront fees
- You can make a ‘lump sum’ payment or a series of monthly payments over a period of five to six years
- Contact from creditors is stopped and only the agreed IVA payments can be requested
- Once you have made the final payment on your IVA, the remainder of your debt is written off. This can be as much as 85%
- IVA will remain on your credit file for a minimum of 6 years so this will affect your credit rating and any future credit applications
- To be eligible, you must prove that you are unable to repay your current level of debt
- Applicants MUST how that that have some spare monthly income after priority bills and household expenses are paid
Debt Management Plan
- An arrangement with a 3rd party debt company that isn’t legally binding so the agreement can be changed at any time.
- Your debt management company will deal with your creditors directly. You will no longer receive phone calls and letters asking for money
- After working out your incomings and outgoings, a monthly repayment amount is agreed.
- Your monthly repayment is divided and used to make individual payments to each of your creditors,
- No longer having to deal directly with creditors, will help to alleviate some of the stress associated with debt
- If your financial situation changes, you can adjust your monthly payment amount
It is important to think about each option carefully before committing to one or the other. Both options will improve your current situation or you owe over £3000 and you’re struggling to make repayments to creditors.
If you would like to find out more about IVAs and Debt Management Plans, or you wish to find out whether you are eligible, please click here.
