Residents of the UK can find private debt consolidation loans online and from banks and building societies.
They can also find government debt consolidation loans designed for different consumer groups.
When searching for these, care must be exercised because unscrupulous companies advertise their debt management services as government schemes in an attempt to profit from the financial troubles of consumers.
Administration orders are government debt consolidation loans for individuals with debts of £5,000 or less. Consumers who can afford to make regular payments toward their debts may be eligible to apply for an Administration Order with the local county court.
The individual enters an agreement to make regular monthly or weekly payments from income to the court, which allocates the money to each creditor.
With an Administration Order, payments can total the entire amount owed or a percentage of it. No interest or other fees are paid under this order and creditors may not take further action without court permission.
A fee of no more than ten percent of total debt is charged for this debt consolidation help each time a payment is made.
To qualify for an Administration Order, consumers must owe money to two or more creditors and have a High or county court judgment that they are unable to pay in full.
Individual Voluntary Arrangements, or IVAs, are other government debt consolidation loans. An IVA is an agreement between the consumer and creditors to pay all or a portion of the debt.
This arrangement must be established by an authorized debt specialist called an insolvency practitioner (IP). The consumer makes payments to the IP who then allocates the money to creditors per the arrangement outlined in the IVA. There are no limits to debt level and repayment amount under an IVA.
An IP charges a fee to negotiate with creditors and manage the IVA. In some cases, this involves both a setup and ongoing monthly payment fee. The IP helps consumers establish how much they can afford to repay under these government debt consolidation loans.
Once the IP has contacted all creditors and obtained their agreement for the IVA, these creditors cannot take action against the consumer. While the IVA is being established, the IP may be able to secure a court order to prevent creditors from taking action during this period.
Informal arrangements (IAs) are government debt consolidation loans that help individuals lower their payments for all or some debts. Creditors are under no obligation to accept an IA and they may cancel the arrangement at any time.
There is no cost for a consumer to establish an IA but once it is created, the consumer must make the agreed payments and keep creditors informed regarding financial status.
These government debt consolidation loans can be renegotiated if the financial situation worsens. On the other hand, creditors may expect payments to increase if the financial situation improves.
Small payments under an IA may not be enough to cover interest or other charges, increasing the amount and repayment period.
If consumers do not explore these government debt consolidation loans shortly after finding themselves in debt, another solution may be necessary.
When they seek debt consolidation help from the experts, consumers learn about debt relief orders and fast-track voluntary agreements as two ways to get out of bankruptcy.
These solutions are designed for people who need more than mere debt consolidation loans.
- Britons in debt coming round to the benefit of IVAs (independent.co.uk)