New rules on credit card debt: what do they mean for me?
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DROs are just one option for getting out of serious debt. Have a look through the alternatives, in case there’s a better one for you.
Yesterday we explored how bankruptcy and IVAs can sometimes be the right alternative debt solutions if you find that a DRO wouldn’t be right for you. There are a few debt out there and it's important to consider all options to find the right one. So to carry on with that, let’s look at whether a Debt Management Plan or debt consolidation could be alternative to a DRO.
Debt Management Plans (DMP)
If a DMP was the most appropriate solution for you then you’d repay all of what you owe to your lenders, but your payments would be reduced so that they were affordable. Because everyone’s situation is different, the length of a DMP can vary. A DMP could be right if you think you can repay your debts in full, but you can’t maintain the current payments.
A DMP is an informal solution, so you can use a debt solutions provider who will do all the work and deals with any creditor contact for you, or you could speak to your lenders directly to arrange your own plan.
DMPs can help by allowing you to repay everything that you owe over a longer period of time but they can also act as a temporary measure until your circumstances improve. As it’s informal in nature if you find yourself with more money coming in it may be possible to stop the DMP and go back to your normal payments.
For more info have a look at our page on DMPS.
Next, let’s look at debt consolidation as an alternative to DROs.
This involves taking out a new loan to cover your outstanding debts, you use this to pay your individual lenders back, and then pay the new loan back on a normal monthly basis.
If you did this you’d need to be aware that you’d pay the new loan back over a longer period and so it may cost you more overall. As with any borrowing, you’d have to be completely certain you could make the repayments, especially if it was secured against your home. You wouldn’t want to find yourself in a situation where you’re still struggling with debt and running the risk of losing your home as well.
If you just want to reduce your payments and simplify your finances then debt consolidation may be the right option, have a look here at debt consolidation loans.
There’s always a way to tackle problem debt and we hope we’ve shown you that there are lots of option if a DRO wouldn’t work for whatever reason. If you give us a call to chat through some of these solutions we'll make sure that we look at every detail so that we can point you in the right direction. It makes sense to get expert advice before committing to any debt solution.
by Christine WalshBack to blog home