Around 8 million people in the UK struggle with debt. But for all those people I wonder how many are aware what debt products are available in the UK. I’d be shocked if more than 5% could name a debt product other than bankruptcy. And bankruptcy is a scary word, with many myths surrounding its impacts. It’s little wonder people do not explore this avenue further.
If you’re having debt problems, you should know what products are available to you. Not all of them are as scary as bankruptcy, and even that debt product under the right circumstances can have a positive impact. We take a look at four popular debt products in the UK and how they could help you with your debts.
Let’s start with the one you’ve all probably heard of. Bankruptcy can radically change your financial situation. For many people it is the lifeline they have been waiting for. Some people will not need to make any monthly repayments and in 12 months their qualifying debts will be written off. There are of course things to consider such as the application fee £680 and the impact on your credit rating. Before starting any debt product you should seek the help of a debt advisor; that’s especially true before bankruptcy. There more information about bankruptcy all around the internet. In short, do your research.
2. Debt Relief Orders
If you qualify for this debt product then a debt advisor will no doubt recommend it to you. That’s because if you do qualify you won’t be required to make any more repayments to your debts. After 12 months, providing your circumstances haven’t changed, your debts will be written off. The set up fee for this debt product is £90. Unfortunately, the qualifying criteria is for a Debt Relief Order is strict. The criteria is as follows:
•Debt level under £20,000
•Disposable income under £50
•No assets over £1,000
•Not a homeowner
•You circumstances are unlikely to change in the next 12 months
3. Individual Voluntary Arrangement
This is the fastest growing debt product in the UK. Payments are made on a monthly basis, typically for five years. Any debt not repaid during this time is written off. If you own a home, this will be protected. There are many different things to consider before you start an Individual Voluntary Arrangement. However, if you do start you could benefit from the following:
- One affordable monthly payment towards all your debts
- Freeze your interest and charges
- Write off up to 90% of your debts
- Protect your home and assets
4. Debt Management Plans
This is a popular debt product. In fact, it’s likely to be the most common debt solution in the UK. However, there are no official records. That’s because, unlike the other solutions, this isn’t a legally binding arrangement and there are no official records made. It’s more an unofficial agreement made between you and your lenders. You make one affordable monthly payment towards all of your debts. You continue to do so until all of your debts are repaid in full.