These are voluntary agreements with creditors to repay debts over an extended
period. They constitute an arrangement between yourself and a Debt
Management company who agree to supervise and distribute your debt
repayments. They take a payment each month and split it between your
creditors.
It is sometimes possible to restructure repayments into a more convenient plan
and you would therefore not have to sell your home as part of the agreement.
Interest charges can sometimes be stopped, and Debt Management companies
may or may not charge a fee for their services. The Debt Advice Network would
always endeavour to recommend non-fee-charging debt management
companies.
Debt Management usually works best for those with at least three creditors,
debts of ¢5,000 or more and at least ¢100 a month of free income to help settle
the debts.
Debt consolidation can be done in a number of ways and depends on your
current residential status.
Two of the options are: unsecured loan and secured loan. You should always
seek professional advice before pursuing the secured loan option as your home
may be put at risk if you do not keep up the repayments
●Securedloanorremortgagewhichisbetter?
This is down to individual choice. Mortgage rates are usually lower and setup
fees higher than those of loans, because of the length of time involved. However,
most of the costs can be incorporated in the loan. A mortgage and secured loans
are secured on your home and therefore your home will be at risk in either case if
you cannot meet the repayments.
●Willaconsolidationloanhelpme?
If you can consolidate all of your existing debts into a loan that offers lower total
repayments, then this could be the best solution. You would save money in the
long run and avoid more drastic solutions.
However, many people who are experiencing serious financial difficulties tend to
have poor credit rating and therefore a low interest rate would not be offered. If
this is the case then taking on more financial responsibility is likely to make your
situation worse.
