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How much does an IVA really cost?

// June 14th, 2010 // No Comments » // Debt

A friend of mine recently looked into getting an IVA (Individual Voluntary Arrangement), as he is £27,000 in debt thanks to a healthy combination of credit cards, overdrafts, rent arrears and council tax. Off he went to learn his socks off about IVAs but came back confused and put off.

I asked him what the matter was and he replied, “It’s going to cost me about £3000 to get an IVA, I thought they were meant to help you get out of Debt not push you further into it?” I knew this was going to happen so I sat him down and explained to him how an IVA actually works!

Who really pays for an IVA?

When you arrange to get an IVA, you may be shocked to find that there are additional costs involved for setting up the IVA, and payments to the insolvency practitioner and debt management company for their work.

However, don’t worry, here’s the clever bit so listen up! When you arrange an IVA you agree to the payments involved with setting up such a debt solution. These IVA payments are then added to your total debt. Your total debt is then consolidated and you pay it off monthly in one payment. Now the clever part: Remember that your IVA can clear a certain percentage of your debt, so technically any additional costs you would have incurred will be cleared with the rest of your debt. So in reality it is your creditors who will pay the total cost of your IVA and not you as you first thought!

You can avoid bankruptcy

// December 15th, 2009 // No Comments » // Debt

It is certainly desirable to avoid bankruptcy if at all possible, given the restrictions placed on a person who has been made bankrupt, although in certain cases it may be the best option. What are the alternatives? Advice should always be sought from charitable organisations that specialise in debt help; they may be able to negotiate reduced payments to your creditors, if there is no realistic possibility of being able to pay the debts off in full.

If the person owns a house with sufficient equity, re-mortgaging may be a possibility, although this should only be done after careful consideration, and with independent, professional advice. The money will still be owed, but to a different company, and the debtor will need to be sure that they can meet the increased repayments. If not, you run the risk of losing your home and all of the possessions contained within it.

The third alternative is not one that I would normally advise, as it has the potential to ruin relationships. Friends or family may be willing to lend money to help out, although this should be treated as any other financial deal, and not as an easy way of getting out of a difficult situation. Such an arrangement should only be made with repayment terms clearly laid out, and if the ‘borrower’  can be certain that they can adhere to the agreement.

The fourth alternative is a simple way to avoid bankruptcy. Do not get into debt in the first place! Although some people find themselves in trouble because of circumstances, for example, divorce or job loss, it is always wise to plan for contingencies, and to live within your means. Try and keep your spending to a reasonable level and try not to buy things you cannot truly afford. Instead, put money aside to save up for that ‘must have’ item!

Become Debt Free With Debt Consolidation

// May 26th, 2009 // No Comments » // Debt

With the current state of the world’s economy, millions of people are  finding themselves completely overwhelmed with debt. Some people that didn’t have any problems at all in paying all of their debts a year or so ago, are now finding that the rising costs of living aren’t leaving enough money to pay bills.

Being in too much debt can quickly destroy your life and it can have devastating effects on your health. The hectic pace of today’s world is stressful enough without adding the worry of not being able to meet your financial obligations.

There are several ways that you can work toward becoming debt free. Many people are turning to debt consolidation to achieve this goal. With debt consolidation, you simply get a loan that is large enough to cover all of your unsecured debt and pay them all off.

While this might not seem sensible, it has a several advantages. You can save a lot of money on the high interest rates that credit cards charge each month and instead of making numerous payments, you’ll only have one payment. And, if you consolidate your debts before you credit score is damaged, consolidation won’t affect it.

Reduce Your Debt!

// April 14th, 2009 // No Comments » // Debt

Today, it does seem that the United States got itself in a terrible financial crisis. However, you can bet that history repeats itself. This was not the first time that the United States fell back in deep economic crisis; we have been here before. But like what happened before, the nation will recover somehow.

However, we do not know when that recovery will take place. In the meantime, let us focus on what is at present. Debt is probably the factor that puts us most at risk. For the past years, people have become dependent on credit that they become unaware of the drastic possibilities of a severe debt accumulation to the point of not being able to pay.

The credit card balance of the United States alone brackets at approximately $1 trillion. That implies a debt of about $8,000 per individual yet excluding car finance, advance credits and mortgage debts, loans and other forms of financial obligations such as unpaid medical bills and student debts. Do the math and the debt just seems to go on forever. Luckily, we can we do something about it.

You have two choices. You can get professional assistance from a company that offers solutions to debts or you can choose to deal with your problem yourself.

There are many companies that have experienced negotiators who can negotiate lowered interest rates thus, tremendously decreasing the amount of your debt. This is called debt settlement. Many companies offer debt settlement services. In addition, some companies offer debt consolidation loans. Although it is not cheaper if used long term, it can provide you with easier-to-manage monthly payables having used the loan to cover your existing debts.

Dealing with the problem yourself may seem difficult and scary but it would only take discipline and proper planning to be able to do so.