Many of us these days have found ourselves crippled with things like credit card debt and various other types of debt such as personal loans, store cards, car loans or mortgages. It was fine when times were good and there was plenty of money about and when we knew that we could leave one job and walk straight into another one, often for more money and better benefits. However, things have changed dramatically over the last few years and the economy is in a terrible state. People have been laid off work or have had their income or hours cut so they are earning less. It is no longer possible to switch from one job to another. In fact, many people will find that they are up against a host of other applicants no matter which job they apply for. Times have changed and the problem is that most of us have been left in a financial mess because of it.
So What Can We Do?
If you are one of those people who cannot seem to keep up with their debt repayments then the worst thing you can do is ignore the problem however tempting that might be. Sitting around hoping you will win the lottery to help solve your problems is not realistic either. You really need to tackle your problems head on and if you are sure that you just cannot manage your payments or if you have been falling into arrears, then you need to do something as soon as possible. There are a number of options open to you, one of them being an IVA (individual voluntary agreement).
The Fundamentals of an IVA
An IVA is an agreement between yourself and your creditors where you would pay a reduced amount off your debt every month for a specific period of time. Most IVAs will last for a period of about five years and hopefully by the end of that time, you will have paid off most of your debt. Any remaining debt after the end of the IVA is written off, leaving you debt free. The IVA should leave the debtor free to pay his or her other financial obligations each month.
The Downside
Sounds great doesn’t it? Well the truth is that this can be a fantastic way for you to have a fresh financial start but there are a few disadvantages to it. It is worth noting that you may have to give up some of your assets in order to pay off your debts. Another problem is that your credit rating will be affected in a negative way. You will not be able to get credit during the term of the IVA and it could affect your ability to get credit afterwards too.
It is important to weigh up the pros and cons of an IVA before agreeing to it. Making a fully informed decision is the best way to ensure you are doing the right thing for your specific situation.