Category Archives: Debt

Good and bad debt

Good debt vs. bad debt

Just about everyone will have to borrow money at some stage of their lives. Most wishing to own their own property will borrow on a mortgage but even those looking to acquire a car may take out a personal loan or lease plan.

Sometimes there are great deals around that are hard to decline. Take, for example, many of the low cost credit deals offered by car manufacturers.

These are a great way to get a new car at very affordable rates of interest.

Good debt vs. bad debt

Good debt vs. bad debt

Deals like this can be classed as ‘good debt’ since they are amongst the lowest cost way to borrow one can find. Especially if you already have the cash available where you can invest in a high interest savings account and make more on the interest than you lose on the loan charge!

The key with any form of debt is making sure that the payments remain affordable even if personal circumstances change. That means if the hours available to work are reduced and the net family income drops, the payments are still affordable for at least six months.

Getting credit isn’t easy when you’ve got bad debt history

Easy credit is now a thing of the past. The number of providers has reduced dramatically since the early ‘naughties’ and those that are in the market are looking for good quality customers.

That means borrowing whilst your credit history is in tip top condition and you have a provable source of income. Without either of these, the rates and terms on offer may be less attractive.

So, good debt can be defined as debt that is affordable and comfortably repayable within the available family income.

But circumstances in these uncertain times can change fast meaning that what was once affordable now becomes unaffordable.

When debt gets out of control it eats away at family life and relationships. Cutting spending and making savings can generate some spare income each month but more extensive action may be needed if payments are higher than free income.

bad debt history

bad debt history

If there are just one or two lenders (for example a mortgage loan and car loan) then it should be easy to speak with them and try to arrange a reschedule of the payments over a longer period of time.

Provided you are up to date with the payments then most lenders will listen sympathetically to a request for changed payments provided the proposal is sensible.

Missing loan payments

Even if you have started to miss a few payments, it should be possible to get a payment plan agreed that allows the family to live on a day to day basis without the fear of repossession or legal action.

If there are a number of debts and it is not clear how to move forward, it can pay to enlist the help of a specialist debt management company. As they deal with lenders every day and know what will be acceptable, they can help drive the best deals to get you back on track.

Missing loan payments

Missing loan payments

It may be worthwhile paying a small fee to have help sorting out your finances rather than struggling on and getting into a worse mess.

There are also a few good debt management websites that can help shed light on what is available to those with debt problems. You can read more for help on sorting out your loan problems at pales.co.uk.

Battling your debt, the IVA alternative to bankruptcy

If you’re battling with debt, you’ll unquestionably know how demanding dealing with creditors and working out a repayment plan can be. Actually, for those with unsustainable levels of debt, it can seem as though personal bankruptcy is the only solution. Before you consider personal bankruptcy, however, you need to consider all available options. An IVA is amongst the most attractive solution available. Despite the fact that personal bankruptcy can discharge some debt, in the end, it frequently has a devastating impact on a person’s credit history. An IVA – which is short for Individual Voluntary Arrangement – may help some people resolve their debt within a mere 60 months.

Battling your debt, the IVA alternative to bankruptcy

Woman Calculating Her Debt

Woman Calculating Her Debt

This does not only seem good, it truly is a realistic option from declaring personal bankruptcy. What exactly is an IVA? Simply put, an IVA is a legally binding contractual agreement between a person and debt holders. Typically, under this agreement, an individual might have as much as 70% of their debt wiped off. She or he can pay the rest of the amount within a 5 year period. The program can be modified to match an individual’s unique condition. 75% of creditors by debt value must approve the IVA proposal for the arrangement to be binding on all creditors. This might appear improbable – however, there’s a clear incentive to accept an IVA simply because they will probably receive more money than they’d get in case of a personal bankruptcy. For you as a consumer, an IVA offers an opportunity to discharge the debt contained in the IVA, and, as opposed to a personal bankruptcy, you’re very unlikely to lose your house. IVAs generally do remain on an individual’s credit history for six years, however, and are therefore still a serious matter.

Man Holding a Legal Document in Hand

Man Holding a Legal Document in Hand

To be eligible for a an IVA, you have to be a citizen of the United Kingdom, owe more than £15,000 and also have several creditors to your name. There are several professional debt management companies who offer advice and support regarding how to tailor an IVA to your needs. Please bear in mind that these companies are not funded by the government. If you want independent and confidential advice you should speak to the National Debtline. The service is free since the institution is funded by the government. However, you need to be aware that due to the increasing amounts of personal bankruptcies the governmental body may not be able to provide the service level and speed a private debt management company can.

You’re not alone: Help with Bankruptcy & Debt

Hands Holding Bankruptcy Law

Hands Holding Bankruptcy Law

So, if you’re facing bankruptcy, there’s no need to feel ashamed. By taking an active stance and addressing your debt issues, you may even be able to avert insolvency altogether.