How Does Debt Consolidation Work: No matter how carefully you plan and budget, it’s easy to find yourself overwhelmed by debt and not sure what to do next. When that happens, one of the most important things you can do to get back on track with your finances is to find debt consolidation solutions that will get you back on track in terms of both money and credit rating so that you can get back to living life on your own terms! In this article, we’ll look at how does debt consolidation work, in particular an IVA, why it might be right for you, and how it works within the legal framework of the UK.
What Is Debts Consolidation
Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This can be an effective way to reduce monthly payments, as well as the total amount of interest paid on the debt.
In the UK, there are a few different ways to consolidate debt, including taking out a personal loan, using a balance transfer credit card, or enrolling in a debt management plan. One option that is available to residents of the UK is an Individual Voluntary Arrangement (IVA).
What Is An Individual Voluntary Arrangement (IVA)
An IVA is a formal, legally-binding agreement between you and your creditors to pay back your debts over an agreed period of time, usually five years. Your monthly payments are based on what you can afford, and once the IVA is in place, interest and charges on your debts will be frozen.
Any debt not included in the IVA (such as council tax or child maintenance) will still need to be paid. If you keep to the terms of the IVA and make all your payments, the rest of your debt will be written off at the end of the agreement.
What Can I Consolidate Via An IVA?
You can consolidate all debts that are owed to unsecured creditors. This includes money you owe on credit cards, personal loans, payday loans, and overdrafts. You may also be able to include some tax debts, catalogue debts, and store card debts. If you’re a homeowner, you can also include a second charge or secured loan in your IVA.
Could I Be Eligible For An IVA
If you have a lot of debt and are struggling to make your monthly payments, you may be wondering if you could be eligible for an IVA.
To be eligible for an IVA, you must:
-Be resident in England, Wales, or Northern Ireland
-Have unsecured debts of more than £5,000
-Be unable to repay your debts within a reasonable period of time
-Have a regular income
If you meet these criteria, you can apply for an IVA by contacting a licensed insolvency practitioner.
Getting Started With An IVA Application
Applying for an IVA is a formal process and there are specific rules that must be followed. The first step is to contact a licensed insolvency practitioner (IP) who will assess your financial situation and give you advice on whether or not an IVA is a right solution for you.
If you decide to go ahead with an IVA, the IP will help you prepare the necessary paperwork and submit it to the court. Once your application is approved, your name will be added to the IVA register and you will be required to make monthly payments toward your debt for a period of five years. At the end of the five years, any remaining debt will be written off.
You can learn more about debt consolidation and how it can help you debt write off on Monemyst.