Are you getting the right debt advice?

Struggling with debt can be a difficult and stressful situation, and it's easy to feel like you will never be able to find a way out.

More and more people are getting into trouble with debt these days, yet many are unaware of what help is available. In reality, even people with severe debt problems can get help from a professional debt adviser.

Importance of good debt advice
If you ever find yourself having problems with your debts, then you should contact a professional debt adviser as soon as possible. Since the interest on debt often means it grows very quickly, putting it off can result in you paying a lot more overall.

How can a good debt adviser help me?

General debt help
In a lot of cases, simple debt advice is all it takes. If you have trouble managing your money, you're not alone - many people have this problem, and it's not unusual for it to lead to debt problems.

Your debt adviser may be able to recommend a few changes in your spending that could help you to get back on track. Equally, they may help you to set up a budget, so you can make sure you're aware of how much money is needed for each of your commitments, and how much you have left to spend as you wish.

If the situation has become more serious, and your debts are becoming unmanageable, then your debt adviser may recommend a debt solution that could help your situation.

What debt solutions are available?
There are a number of debt solutions available that can help people in various situations. Your debt adviser can help you to decide which (if any) is best for you.

Debt consolidation loan
A debt consolidation loan is typically for people who have relatively manageable debts, but would like to simplify their finances and/or reduce their outgoings. It is essentially a new loan that pays off your existing debts, ending your ties to your original creditors and consolidating those debts into one convenient monthly payment.

Many people with a debt consolidation loan choose to reduce the amount they pay each month by spreading their repayments out. If you choose to do this, be aware that because you will pay interest for longer, you may end up paying more overall.

However, it's still possible to save money if you consolidate high-interest debts, such as credit cards. So long as the interest on the debt consolidation is lower, you could save money, although a longer repayment period may limit the amount you save.

Debt Management Plan
For debts that have become unmanageable under the existing terms, a debt management plan is an informal arrangement with your creditors that can allow you to repay your debts at a more manageable pace.

As well as reducing the amount you will pay each month, you may be able to negotiate a reduction or freeze in interest and other charges, which can prevent the debt from growing - or at least slow down the rate at which it's increasing.

However, be aware that repaying any debt more slowly will take longer and can cost more, as it'll have longer to attract interest. This is why it's important to work closely with a debt adviser to ensure that your repayments are affordable, while still allowing you to repay what you owe.

IVA (Individual Voluntary Arrangement)
If your debts have become so unmanageable that you don't think you will ever be able to repay them in full, an IVA could help you to avoid bankruptcy by agreeing to pay a set percentage of your debt to your creditors, after which the remaining debt will be written off.

You will make monthly payments to your Insolvency Practitioner, who will subsequently distribute it among your creditors as agreed. This will usually continue for five years, and on successful completion you will be legally debt-free.

There are some things to consider before entering into an IVA, though. You may be expected to give up a portion of any increase in income earned during your IVA (including pay rises and bonuses), and if you are a homeowner, you may also be expected to release some of the equity in your home in the 54th month of the IVA.

Although an IVA is typically considered preferable to bankruptcy, there are some cases in which bankruptcy is the more beneficial option. Your debt adviser will offer advice on the best choice for your particular needs.