Debt Consolidation Loans: are there other ways to consolidate your debts?
Debt Consolidation Loans are one way that you can get debt help. Using this loan, you can pay off all your other debts so that your payments are consolidated into one, affordable monthly payment. However, there are other solutions that also allow you to consolidate your loans that are worth consideration.
Credit Card Consolidation
This is very similar to a Debt Consolidation Loan, but, rather than applying for a loan, you apply for a 0% interest credit card. Using this card to pay off your debts is similar to freezing your interest, but it is important to note that this only happens for a limited period of time. After this, the card usually has a very high interest rate, so this strategy is only advisable if you are absolutely certain that you can pay off your entire debt in the limited time period.
Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) also consolidates your debts into one, affordable monthly payment. This is calculated by your Insolvency Practitioner, following an in-depth review of your income and expenditure. However, this is a more legal arrangement which must include all of your unsecured debts and also halts communication between you and your creditors. Once you begin the arrangement, your Insolvency Practitioner contacts your creditors and they are no longer legally allowed to contact you.
As a legal solution, the IVA also formally freezes your interest and payments and has a time limit of five or six years for your affordable monthly payments. After this period, if you have managed to successfully complete all the terms of your arrangement, your remaining debts are written off.
A Trust Deed is a similar solution to an IVA, but it operates in Scotland, rather than England, Wales and Northern Ireland. Your Trustee calculates your surplus income based on your genuine income and expenditure and uses this to decide an affordable monthly payment to be distributed between your creditors. Your creditors only contact your Trustee, your interest and fees are frozen, and after four years of payments, your debts can be written off.