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Do you feel like you’re drowning in debt? Make sure you know about these 4 ways to clear debt.
If you feel like you’re drowning in debt – don’t panic. There are ways out of problem debt: here are 4 you may not have heard of.
A Debt Relief Order (DRO)
If you have less than £20,000 in debt, low assets and less than £50 to put towards your debts each month, a DRO could be for you.
A DRO is a formal way to deal with insolvency and it allows you to suspend your payments towards your unsecured debts altogether for a year. If your situation doesn’t improve over the year, your debts on the DRO are written off.
Individual Voluntary Arrangement (IVA)
An IVA can lower your monthly payments on your unsecured debts and, after it’s ended, the debts included on the plan are written off.
An IVA is a formal way to deal with insolvency and usually lasts for 5 years. If you are a homeowner, you won’t need to sell your house with an IVA but you’ll need to try and release equity six months before it ends and you may have to reduce spending on non-essential items.
Minimal Assets Process (MAP)
Are you living in Scotland and struggling to put anything towards your debts? MAP might be able to help. MAP only lasts for six months and completely suspends your payments. If everything goes to plan, the debts included are written-off at the end.
To qualify for MAP you have to have debts of more than £1,500 and less than £17,000 and you can’t have assets worth more than £2,000 in total.
Debt Arrangement Scheme (DAS)
DAS is a way to help people in Scotland repay their debts at a rate they can afford. With DAS you’d still pay off all your debts but with monthly payments that are affordable for you.
It will take you longer to pay off your debts, as you’re paying less over a longer period of time, but your interest and charges will be frozen and paying at a lower rate should provide welcome relief from the worry of debt.
What’s the catch?
If you are struggling with debt a solution could work for you. But there are downsides too. With any debt solution your credit record will be damaged, usually for six years from the time you start. This will make it harder or more expensive to borrow money. There may be other restrictions too: depending on the debt solution you may need to stick to a tight budget, your name may be placed on the Insolvency Register, or you may be restricted from certain jobs, such a being a company director.
These are just a few of the ways to tackle personal debt. To find out if any of these – or another solution – could help you get your finances back under control why not take our Money Smart report now.
To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.
by Christine WalshBack to blog home