Debt Relief Options – Best Ways to Eliminate Your Unsecured Debt
Article by matthew couch
You probably are sick and tired of reading one credit card statement after the other month after month. You probably are feeling desperate for a break from the mind numbing phone calls from collection agents that you are receiving on a daily basis. You probably wish that debt relief options were more than just a clich
Find the best ways to consolidate debt
Article by Jason Jones
There are several ways that borrowers can seek help if they have debt problems. Debt consolidation is important as it provides borrowers and consumers with large and insurmountable debts the ability to manage and eventually pay off their debts. This can be achieved by first seeking the services as well as advice of suitable debt management firms. Most of these firms offer good advice in regards to best ways of consolidate.
One of the most popular provisions of consolidation management is by way of signing up for an IVA or individual voluntary agreement. An IVA agreement is an agreement made between a debtor and creditors, especially when there are large amounts of debt owed to a number of creditors. This agreement is usually advised for borrowers who are faced with problems making their repayments and are forced to choose between paying off their debts and meeting their living costs.
IVA agreements involve consolidation debt management programs where a debt management firm will consolidate a debt owed by a borrower and then draft an agreement which is then sent to all creditors’ owed money and finally approved by an insolvency practitioner. If the creditors approve the payment plan associated with the IVA consolidation plan, then the borrower will be required to make certain small, manageable payments. After five years, any debt still owing is legally written off and the individual hassle free.
Another popular consolidation debt management program is a debt consolidation plan that is managed by a debt management firm. Any consolidation debt program should be professionally managed and advised. The debt management firm usually provides suitable advice to its clients on matters regarding debts, income, budgeting and other matters regarding personal finances. This is so as to enable the individual client better manage their personal finances and stay out of debt in future.
Once all debts have been consolidated by the management firm, a reasonable and manageable solution is found that will enable the debt to be paid off eventually. A good approach can be taking out a consolidation loan. This is an unsecured loan used specifically to pay off the consolidated loan. Once the loan is paid off, the borrower is declared free from debt and is left only with the consolidated debt to repay.
The other approach is to contact all creditors individually and renegotiate new terms that will allow easy repayment of the debts owed. If this is acceptable, some of the loan may get written off or interest charges and penalty fees stopped. The loan is then repaid in easy and affordable instalments usually deducted from the borrower is income.
Debt Free Direct provides a range of debt solutions such as Debt Management plans, debt consolidation Loans and IVA. To get specialist advice now, visit our website http://www.debtfreedirect.co.uk/ or contact DebtFreeDirect on 0800 954 5586.
Best Ways to Consolidate Debt
Often, the most obvious “best” ways to consolidate debt are not always the smartest. However, with a bit of discipline, anyone who carries what is normally viewed as an uncomfortable debt load and save on interest costs over the long-term.
Special Rate Credit Cards
Probably the most popular ways to consolidate debt include using low/no/special rate credit cards that charge a minimal amount of interest for a pre-determined amount of time and debt consolidation loans. Assuming this period is six months, the one of the ways to consolidate debt would be to pay out all other higher rate debt with the card and, at the end of the six months’ special period, flip the balance onto another low/no/special rate card.
The problem with the above strategy is that many people do not use it as one of the ways to consolidate debt. Instead, they will use the “freed up” credit to make other purchases and within months they have now actually increased debt to the point where it becomes unaffordable.
And when that low/no/special rate expires, the costs become astronomical.
Consolidation Loans
The other popular strategy involves obtaining a consolidation loan that will reduce the monthly outlay of cash as well reduce the amount of interest spent on carrying such a debt load. In such instances, borrowers need to evaluate where they need to see the immediate benefits (i.e. cash flow or reduced interest) as they will often not manage to achieve both.
Using Home Equity
Alternative ways to consolidate debt include refinancing a mortgage and taking advantage of home equity. However, such strategies could involve penalties to break out of existing mortgage terms.
With rates as low as they are, it may make sense to pay a penalty extend the low rate beyond the existing term.
As well, Home Equity Lines of Credit (HELOC) also provide value in terms of low rates and payment flexibility. In this regard, borrowers will win in terms of lower annual interest costs and the lower payments allow for an improvement to cash flow. The largest pitfall with a HELOC is that it is revolving, enabling a non-disciplined borrower to never repay the debt. Since the availability of credit can be a big issue for most, using a HELOC to repay debt is not always the among the smartest ways to consolidate debt.
Summary
Clearly, using special-rate cards has got to be one of the easiest ways to consolidate debt. However, in order to be successful using such a strategy, the borrower needs to have tremendous discipline to repay the debt and not dig into deeper financial problems. Consolidation loans provide a clear and full amortization of debt, but often come at higher rates and may not improve monthly cash flow sufficiently. Ultimately, using home equity can secure lower rates as well as lower payments, but using a HELOC to do so can result in large interest costs if the principal is never repaid.
Chris has more than 16 years of experience in the financial services industry, having helped thousands of clients fix their personal finances. As the author of Help Fix My Finances, a personal finances management e-book, he also contributes articles and advice on the best ways to consolidate debt at Debt Consolidation Opinions.com.
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