Without even intending to, you are already in debt the minute that you graduate from college because of the student loans that you probably had to take advantage of. Once you secure a job, part of your entry-level salary will be allotted to paying off these loans. Then comes the credit card offers from different companies.
In order to have a means of purchasing things, you may want to sign up for one or a couple of these cards. Before you know it, you have more debt than you can easily repay because of the ease by which the plastic card can be used to purchase things. It is exactly the ease of access to credit which tempts most people into borrowing more than they can pay back. The result is being in debt even before you can build a solid credit history for yourself.
Most Popular Way To Be Debt Free: Debt Management Plans
The good news is that there are several ways for you to become debt free. If you only managed to acquire a lighter load of debt instead of very serious debt problems, then a solution is to go for debt management.
First, let us compare this with another solution to get rid of debts, which is to take out a debt consolidation loan. When you go online, there are plenty of companies which offer such loans to consolidate your debt. The idea is that instead of paying two, three or four credit card companies, you only have to pay one. The funds that you will get from the debt consolidation loan will be used to pay off your other loans.
At the end, you will only be left with one loan to pay which is supposed to have a lower monthly payment and a lower interest rate. The problem with going for this solution to be debt free is that you may not necessarily have a lower monthly payment and a lower interest rate means that you are paying off the new loan for a longer time frame.
Now, how does taking a debt consolidation loan compare with debt management? For this, you will basically be getting in touch with a debt management company. Your financial situation will be assessed, after which a recommendation of the best approach for you to be debt free is made. If a debt management plan is offered, the representative from the debt management company will get in touch with all your creditors to negotiate a lower monthly payment and lower interest rates. What is good about taking this step to be debt free is that you can rest assured that the financial expert can recommend the best solution because they will be assessing your overall financial situation from an objective perspective.
Dealing With More Serious Debts: The IVA
Now, for those who are in serious debt, they might already be considering filing for bankruptcy. Although it is a viable option for those who find themselves to be knee-deep in debt, there are other alternatives that they can look at to be debt free. Remember that you need to exhaust all your options first before filing for bankruptcy because it will stay on your record for seven to ten years.
One such alternative is the IVA or the Individual Voluntary Arrangement. It was introduced in 1986 by the UK government as a way to help business owners out of their debts. Over the years, however, the IVA was modified to help those who are considering filing for bankruptcy. As long as you pass certain conditions, up to 75% of your debt will be written off. It is definitely a more desirable alternative than filing for bankruptcy, so make sure to check out this option when you find yourself dealing with more debt than you can handle.
As you can see, there are quite a number of solutions that you can go for in order to be debt free. Just because you made a few bad decisions does not mean that you can straighten out your financial life. Depending on the gravity of the situation, you can either take advantage of debt management services or apply for the UK government-initiated IVA.