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Problems With Debts? How To Take Control Of Your Finances

Itís very easy to get into problems with your finances. In recent years we lived in a lending boom with lenders falling over themselves to get us to take out new payday loans, credit cards and other financial products. But, now the bubble has burst and we find ourselves living in a credit crunch more and more of us are finding that we can no longer manage the debts we owe.

The vital thing to do here is to look at taking control of the debts that you have and to start to try and sort out your own personal situation. Ignoring debts never makes them go away. It simply allows them to carry on growing so you could get into even worse difficulties here. Let’s take a look at some of the more common debt management solutions that you could look at:

  1. Debt Consolidation

Debt consolidation is a term used to describe the process where you ‘collect’ all your debts together and take out some form of loan to pay them all off. The loans most often used here tend to be secured or unsecured personal loans. This kind of debt management solution can give you some breathing space whilst you pay off your debts as your overall costs will be lower and the interest charges that you would normally incur should stop.

So, let’s say, for example that you have a range of credit card debts, a personal loan and an overdraft that is maxed to the limit. You may find that your salary every month simply goes on making minimum repayments on the money that you’ve borrowed and you cannot actually make any headway on your overall debt repayment as interest just keeps being added to the balances that you owe.

A debt consolidation loan could give you a better solution here and help you repay what you owe more quickly and efficiently. This kind of loan will have far lower interest rate charges than debts such as credit cards, for example, so your overall costs will be lowered. You’ll have one simple monthly repayment to make and, in most cases, this will mean more money to play with every month which should make things easier for you in budgeting terms. And, your debts won’t keep growing.

  1. Debt Management

Some people opt instead for a debt management solution. In this instance you negotiate agreements with the people to whom you owe money (your creditors) with a view to paying back what you owe in instalments. In some cases your creditors will agree to take back less than you owe or they may cut or freeze interest that is added.

So, if you, for example, owe money on various credit and store cards you can work out a budget of how much you can afford to repay overall every month. You can then work with your creditors to try and get them to accept a regular monthly payment to service your debts. Most will do this as they would rather get some money from you than no money at all.

You can set up your own debt management plan if you wish or you can use a debt management company or advisory service to help you out. Bear in mind that some of these services may incur charges and fees.

  1. Bankruptcy/IVAs

If you feel that you have no options when it comes to debt repayments then taking a bankruptcy or IVA (Individual Voluntary Arrangement) route may be a solution that you look at. These are fairly serious steps to take so it is important to take advice before you opt for this kind of solution.

In a bankruptcy, for example, your assets will be taken from you to pay off as much of your debt as possible. You will be restricted in what you can and cannot do whilst you are in a state of bankruptcy but once it is done you will be debt free. IVAs work in a similar way but you can often keep your assets. Here you negotiate repayments and schedules with your creditors to work to repay as much of your debt as possible. Again, once this is done then you will be debt free in most cases.

You also need to remember that these solutions may have a severely negative effect on your credit rating in many cases which may make it hard for you to take out future financing options.

Before you choose any debt solution you would be advised to take some qualified and impartial advice to make sure that you do not do anything rash and that you get the best solution to suit you. The following advisory sites, for example, can give you free advice and help on how to find the best debt management route:

www.cccs.co.uk
www.nationaldebtline.co.uk

So, take advice first from people who understand the situation that you find yourself in before choosing your best debt solution.