The average debt per Brit currently stands at £8,000, with 25% of these people fearing that they’ll never be debt free, and 62% concerned about their personal debt levels. Sound familiar?
Even if you borrow responsibly, it can only take a single event in your life to send you spiralling into a crushing cycle of debt – the loss of a job, the death of a spouse, an emergency vehicle repair.
We want you to know that there is hope, and there is a debt solution out there that will help to pull you out of debt.
In this guide, we explore the advantages that debt relief schemes could offer you as a potential debt solution.
What are debt relief schemes?
Debt relief describes any debt solution that works towards reducing your level of debt. More specifically the term ‘debt relief schemes’ is usually used to describe either a debt management program [such as an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP)]; or a debt settlement scheme [such as a Debt Relief Order, Administration Order or a Debt Management Plan (DMP)].
Debt relief schemes involve either non-profit operated credit counselling services or the assistance of a private debt relief scheme company that will work with you to help you tackle your debts.
The biggest benefit of debt relief schemes: Debt relief schemes can help you reduce your debt
The key benefit of debt relief schemes is that they aim to help you reduce the money you owe to your creditors. As an example, an Individual Voluntary Arrangement (IVA) is a debt solution that creates a formal agreement between you and those you owe money to. A debt agency will negotiate with your creditors to agree upon a repayment plan that is either a one-off (e.g. a debt settlement figure) or a repayment schedule that runs for either 60 or 72 months (5 or 6 years).
Debt relief schemes can reduce the total you repay
A debt relief scheme is one of several debt solutions that may help you secure lower interest rates, reduced fees, or a freeze on both (as is the case with an IVA debt solution). This can immediately lighten your total burden of debt.
Debt relief schemes can help you avoid bankruptcy
Bankruptcy is rightly thought of as the most serious of debt solutions, which can have far and wide-reaching consequences. While this debt relief option officially stays on your credit record for six years, you could be asked on the future credit card, loan and even job applications if you’ve ever been declared bankrupt.
Debt relief schemes can help provide a less detrimental alternative.
Debt relief schemes lighten the load of debt with professional help
As debt relief schemes are a form of debt solution that is arranged by debt experts, they can help you in two key areas: financial planning to manage your money moving forward and removing the hassle of communicating with your creditors yourself.
Take a Debt Management Plan (DMP) as an example. This form of debt relief creates a repayment schedule that’s suitable for your income and expenditure. As a debt solution, you would make monthly payments to a DMP-approved debt agency, which would go between you and your creditors.
If for some reason you’d prefer to negotiate with your creditors yourself outside of a debt relief scheme, start by reading our blog: Use these top 8 tips to negotiate with your creditors.
Worried about debts that won't go away?
Some forms of debt relief schemes could write off a section of your debts
There are several debt relief schemes that write off your debts after a set period. A Debt Relief Order (DRO) is one such debt solution. A DRO runs for 12 months (a period known as ‘moratorium’). During these 12 months debtors aren’t required to make any repayments, and upon completion, if you are still unable to repay your debts they would be written off.
A DRO is a debt relief scheme that acts as a far more affordable alternative to bankruptcy, as a DRO has a set-up fee of £90, rather than £680 per person (as is the case with a bankruptcy debt solution).
However, there are always differing criteria that you must meet for each form of debt solution. For example, to qualify for a Debt Relief Order (DRO), you must owe less than £20,000, have only limited assets, and must not have used any other insolvency debt solution in the past six years.
We are National Debt Help. We’re here to help those who are struggling with debt.
Our debt advisors can help you understand whether an IVA debt solution could pave your way to finally becoming debt-free. Talk with our debt experts today about debt relief – call on freephone 0808 156 7718 or send our team a message via our contact page.