Three Simple Steps Towards Managing Debt

Your finances may be a cause of concern right now, but it is important to remember that there are no debt problems that are completely unsolvable. Although there is no fast-track solution to resolving your current financial situation, a solid plan of action and a change in personal spending habits should be sufficient enough to put your mind at ease.

Step One - Control Your Spending

Managing your cash effectively, and your debt problems will become easier to control. The most important aspect of regaining financial control is organising a budget. If you can balance the books by reducing unnecessary spending, there will usually be enough money left over to chip away at your debts at the end of each month.

If your annual household income is below the £66,000 threshold, you may be entitled to additional benefits and tax credits. Benefits are available for low-income families, the elderly and individuals who are returning to work.

If you are having trouble paying the mortgage, there are three different Government schemes that can help fill the shortfall. The Mortgage Rescue Scheme, in particular, has proved to be a frequent lifesaver for homeowners.

Look to reclaim money wherever possible. Bank and credit card charges are often made unfairly and you might be able to pull in some unexpected funding for other bills. It is also prudent to reassess your council tax outgoings. Somewhat surprisingly, more than 400,000 UK homes are being overcharged.

Step Two - Cutting Overall Costs

Consider consolidation loans as a means of settling emergency debts and reducing your monthly outgoings. Personal loans are a good alternative for those with strong credit ratings, but those with a less-than-perfect repayment history can consider joining a credit union.

Credit cards can often be transferred to a different provider at a preferential interest rate. In many cases, some lenders will waive interest altogether for a limited time period to secure your business. Don't be afraid to change provider regularly as long as it secures you the lowest repayment levels.

For high credit scorers, a change to a different mortgage provider can reduce outgoings dramatically. A 1% rate drop on a £200,000 mortgage can save a household up to £160 per month.

Step Three - Dealing with Debts

If you can reposition your finances sufficiently, it is important to establish good communication with your lenders. By organising a restructured payment plan, the immediate pressure of debt problems can be relinquished until you are in a stronger financial position.

Consider a Debt Management Plan or an Individual Voluntary Arrangement with a third party company to help get your finances back in shape. Remember to make the right choice between a DMP or an IVA as it can be difficult to reverse an arrangement once a proposal has been accepted.

Jeremy Gold is a freelance author who writes extensively about finance. Find out more about how to get out of debt, and advice on how to manage debt.

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Individual Voluntary Arrangements (IVAs) Information

Individual voluntary arrangements are often a debtor's last alternative before bankruptcy. (A person who has been declared bankrupt cannot hold certain jobs.) While the total fees are lower, the actual costs involved in applying for an IVA can run into several thousands of pounds and make this option appropriate if you have unsecured debts of $15,000 or more.

An IVA is a formal agreement between a person in debt and his or her creditors to pay off all or a percentage of the total money owed, usually over a 3 to 5 year period (30-60 months). Some IVAs are set up so that you can use a lump sum rather than monthly payments, of a mixture of the two, to pay creditors. Because in most cases you will be paying off only part of the total debt, the amount of the monthly payment is less than it would be on all that you owe.

A reduced payment is one of the advantages of a IVA. It takes some of the pressure off you and your money. At the end of the period when the IVA has been in effect, any unpaid debt remaining is written off by your creditors.

Because and IVA is a formal, legally binding agreement, you will need to find a licensed insolvency practitioner (typically an accountant or a solicitor) to draw up the document. (Look under 'insolvency' in your local phone directory, which will have a list for your area). All practitioners charge fees for their services in helping you to create individual voluntary arrangement. Some take their fee out of your monthly payments.

Others charge upfront fees. Regardless of how it is paid, this money will come out of you pocket. This licensed professional will help you pull together the documentation required of the IVA. These will include your bank statements, income using pay slips, assets (your property), liabilities (mortgage statements), other expenses and a statement explaining the reasons for your financial difficulty. The last item is very important. The likelihood of your creditors accepting your proposal will improve if the truthful reason for your financial problems is something the people evaluating the proposal can understand and empathise with.

The amount you will pay under the terms of you IVA will be based on your disposable income, and it should be an amount you can realistically pay each month. Once you and the insolvency practitioner determine this amount, the practitioner will draw up the IVA proposal, which you should read carefully and then sign.

If you have been trying on your own to reach an agreement with your creditors but have reached an impasse, then an IVA is probably your best option if you want to avoid the complications and costs of bankruptcy. Yes, it will cost you money, getting out of debt rarely does. However, you will have to deal with your insolvency practitioner instead of all your creditors.

For more information and detailed debt management advice visit Debt Management or try Financial Loans for general financial help and advice.

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10 Tips To Becoming Debt Clear

Being in debt can be frustrating as well as detrimental to your health. Millions of people around the world are currently trying to find ways to become debt clear.

If you are one of those millions, then these 10 tips to becoming debt clear are for you.

1. Sit down and make a list of all of your debts. Include in the list the account number, how much the current interest rate is, how much you owe, when it's due every month, what your credit limit is and how much the minimum payment it. This will paint for you a very clear picture of your debt.

2. On the highest balances, start to pay more than just the minimum payment every month. This will help bring down the interest that is accruing on the balance and help you pay off the balance owed faster.

3. Talk to your creditors to negotiate a lower interest rate. If they are not willing to lower your interest rate, ask them if they would be willing to allow you to change your monthly payment amount to one that is easier for you to pay off.

4. Create a monthly budge of all of your income, bills and other expenses. This will help you cut out extraneous spending that can be used towards bringing your overall debt down.

5. Do not apply for any new debt until you have brought your current debt under control. If you cannot pay for it with cash, check or debit card, you don't need it.

6. Make sure you pay your payments on time within the due date so that you are not charged late fees.

7. Designate some of your income every month to be put into an emergency fund until it is equal to three to six month's worth of bills. This will help you if you should lose your income, need to fix a vehicle, or get sick.

8. Transfer any high interest rate credit cards to a lower rate and consolidate as many cards as possible. Then pay off the cards and bills with the highest interest rates followed by those that have the lowest balances.

9. Change your lifestyle if you need to in order to get debt clear. Consider a part-time job, relocating, or living without amenities until you are in a better position.

10. Seek professional help if your debt is more than you can handle on your own.

To be debt clear, you need to take action today.
Debt Clear Today
Get your life back again. Get started. Today!

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