Excessive borrowing can buy a great short-term lifestyle, but it’s certainly not a financial creed to live by. With the financial crisis taking its toll on more consumers, investors, and businesses, the issue of debt repayment is becoming significantly more urgent, pressing, and stressful.
From loan consolidation to bankruptcy proceedings, the processes for getting out of debt can be long, difficult, and stressful. To save time and trouble when you’re looking to escape debt, we’ve prepared these three non-bankruptcy debt relief options. If you’re stuck in a tight financial spot, don’t panic. Instead, put one of these ideas into action and get busy repaying, restructuring, and reducing your debt.
1. Debt Consolidation
Debt consolidation attracts a lot of praise, and an equal amount of criticism from financial experts and debt relief agencies. Simply put, debt consolidation is the process of paying off multiple loans – often high interest loans such as credit card debt or short-term personal loans – using one larger, low interest loan.
While this sounds like a great strategy for keeping interest rates down, it often becomes an unsustainable debt repayment model. Debt consolidation loans are usually secured – tied to an item of value, such as a house or vehicle – whereas smaller debts are often unsecured. While debt consolidation can be a good idea for some, others will find that the long-term difficulties outweigh the short-term debt relief.
2. Snowball Debt Management
Snowballing debt doesn’t sound good. The image of a snowball getting larger as it rolls down the hill makes most people think of growing debt, which is the exact opposite of what snowballing debt is really about.
Snowballing debt involves paying off minor debts first, then gradually moving up to major debts and large loan balances. Juggling multiple debts can be confusing, especially when you’ve got different interest rates and payment requirements to keep up with. Snowballing debt can be a great option for decreasing the amount of different debts, all the while moving towards major goals at the same time.
3. IVA (Individual Voluntary Agreement)
An IVA isn’t for low-balance debts or small personal loans. A serious option for borrowers looking for relief from major debts, IVA options allow relief and long-term payment options for debts over £15,000. Unlike bankruptcy, an IVA is completely private – a contract for repayments and long-term debt relief.
A major advantage of IVAs is the possibility for debt to be waived or reduced altogether. Under the right circumstances, borrowers who enter into IVAs can see as much as 70% of their debt disappear. When it comes to long-term debt management and relief, it’s difficult to look past IVA debt solutions.