Business & Finance Finance

Getting the Most From Personal Debt Consolidation

Personal debt consolidation is the art of getting the most money written off by your creditors. If you are entering on a proper debt consolidation plan or IVA, which you should be (rather than taking out another loan which may put your home at risk) you should know that the important part is at the beginning of the process, when you can wipe out up to sixty percent (in some cases up to seventy percent) of your debt at a stroke across all your creditors.

What you have to do is to decide the best company to go to in order to do this. These days there are lots of firms who offer debt consolidation packages, but you should investigate all of them carefully before making that first move.

Personal debt consolidation companies - professional ones, that is - employ qualified and experienced insolvency practitioners (or IPs) who will look at your income and outgoings and will assess your budgetary requirements for a regular monthly lump sum to service your debt servicing plan, or in most cases your IVA (individual voluntary arrangement), also known as a Protected Trust Deed in Scotland.

The insolvency practitioner will be skilled at negotiating with your creditors all together, and persuading them to reduce your debt by as much as possible. Under present legislation IVAs must be drawn up collectively and with the consent of all your creditors; no separate agreements with individual creditors are possible. It takes skill to do this, which is why you should consider your personal debt consolidation firm wisely.

After the insolvency practitioner has wiped out most of the capital sum of your debt you will now be faced with paying off only thirty to forty percent of what you originally owed. For most people, this gives a tremendous sense of relief. How much better is this than just paying out more monthly instalments on a loan, which will just end up getting people in deeper debt? After all, personal debt consolidation should not be about creating more financial difficulties further down the line, but rather ameliorating those present difficulties which are already being experienced.

When all the creditors are agreed on a repayment figure it only remains to begin the repayment of the affordable monthly sum as worked out by the insolvency practitioner. This should not materially impinge on your quality of life, and all this is taken into account by the IP when making his or her calculations.

After five years (six years in Scotland) the debt is cleared completely, assuming that the monthly payments have been adhered to as proposed and agreed. Now there is time for a new start. There is none of the stigma of the sort associated with other more severe forms of personal insolvency such as bankruptcy, and the client will start off with a clean sheet. Personal debt consolidation, when executed properly by a reputable firm, will result in a complete recharging of the batteries and the prospect of a future completely without debt at all.

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