It’s important to note that using Carrington Dean for an IVA or Debt Management will cost you money. To get out of debt you want to reduce your expenses. In this article we look at free alternatives for your IVA or Debt Management solution.
When you’re in debt, you have three main options:
1) Debt Management – for when you need to pay less
2) IVA – for those over £7,000 in debt
3) Debt Consolidation – if you owe lots and what to simplify
Who are Carrington Dean?
Carrington Dean is registered in the UK and assist customers with individual voluntary arrangements. They are specialists in IVA arrangements and can assist customers with various debts including bank loans, overdraft, utility bills and mortgage debt.
Ultimate Guide to IVAs with Carrington Dean
If you are carrying a lot of debt and you are worried about being able to pay it all off, then you may have heard of a way to write off most or even all of your debt through taking out an IVA.
An IVA can in a lot of cases be the perfect route for you to follow and it is a system that has worked well for many hundreds of thousands of people that were struggling with their debts.
However, before you jump in with both feet and take out an IVA, there is a case for being cautious about this decision.
You need to take some time to read up and understand how IVA’s work and what precautions to take and the problems you may face further down the line that is not talked about very much.
Let’s take a more in-depth look at how an IVA works and how it may benefit you, but also at the hidden pitfalls you need to be aware of and actively avoid.
What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a way to pay off your unsecured debts with your creditors.
Secured debts are different and cannot be included in an IVA. Your secured debts may include:
- A mortgage
- Car finance
- Hire Purchase agreements
How do IVAs work?
The IVA process is a type of insolvency not dissimilar to bankruptcy. It is a process that you can take to clear your unsecured debts when you are sure that you cannot pay them off.
An IVA is a legally binding contract between yourself and your creditors. It is essentially a written promise to your creditors that you will pay an affordable amount of money each month to your chosen IVA firm over five years.
Your IVA firm Carrington Dean will take your monthly payment and divide it between your creditors ensuring that every single one of your creditors gets a small payment from you each month rather than nothing at all.
Are most creditors on board with IVAs?
In most cases, your creditors will realise that you are in financial difficulty and are unable to pay off your debt with them.
Rather than them having to spend a lot of time and money sending your reminders, demands and threatening court action – all of which can be very costly to them, they will be happy to settle for a small amount of money each month from your IVA firm.
In this way, your creditor will be happy to know that at least a part of your debt will be recovered over the next five years without them having to waste their time and finances on chasing up your debt to them.
Doe Carrington Dean charge for their IVA services?
Yes, Carrington Dean will take a small fee from your monthly payments for their services. While you may think that it would be better for that fee amount to go towards reducing your outstanding debt further, you need to remember that Ashford will be doing a lot of hard work on your behalf.
You can, of course, choose to approach each of your creditors to present your issues and negotiate for reduced fees, but this can be extremely stressful and time-consuming.
Dealing directly with your creditors can also be quite intimidating, especially when you are being threatened with bailiffs and court appearances to help recover your debt.
In most cases, your creditors will be more inclined to deal with a professional IVA company like Carrington Dean to negotiate with because they will know that your IVA will be a legally binding contract that guarantees them a payment each month.
Having a signed IVA agreement in place will also put a stop to any threatening letters or actions coming from your creditors – so that can be a great weight off your shoulders!
How will my Carrington Dean, then IVA firm work with me?
Carrington Dean will consult with you and gather together all of your financial history, details of your outstanding debts and look at what money you have coming in.
They will also look at your costs and outgoing expenditure to work out exactly how much spare cash you will have left after you have met your essential spending.
Carrington Dean will then be able to draw up an IVA proposal to present to your creditors. Your creditors will need to take a vote on your IVA proposal to be accepted.
You will need 75% of your creditors to approve your proposal for it to become legally binding across all of your creditors – even the ones that didn’t vote for it.
Carrington Dean will handle all of the financial transaction between you and your creditors for the duration of your IVA.
What are the downsides of taking on an IVA?
Despite how good the idea of taking out an IVA may seem, this is a solution that is not perfect for everyone.
If you remember a few years back there was a whole raft of TV adverts from IVA companies spreading the news that people could clear their debts by taking out an IVA with them.
However, the way the TV adverts were pitched made it sound as if anyone could take one out and get rid of all their debts.
These adverts were very misleading and the government quickly clamped down on any false advertising by these companies.
You will still see IVA’s being advertised today within acceptable rules and guidelines, but they will still only focus on the benefits of taking one out and not the disadvantages.
For example, little mention is made about the fact that if you own your own home and you have some equity on your property, you will need to release the equity during the last year of your IVA to pay towards your debts.
This means you will have to look at remortgaging your home to release the equity, but getting a good deal for your remortgage may be more difficult because of your damaged credit rating caused by your IVA.
Can anyone take out an IVA?
At the end of the day, an IVA can be a lifesaver for someone with severe problem debts and have no other way out of their situation.
They certainly are not a solution for people that have manageable debts and that has sufficient income to pay them off without help.
An IVA isn’t a quick fix or a sneaky way to get free money and not pay back what you owe. In these cases, anyone applying for an IVA that isn’t in severe debt or has no reasonable means to pay off what they owe will be rejected.
To qualify for an IVA with Carrington Dean you will need to have a steady income. However, if you work a zero-hours contract or you are self-employed, you will need to consult with an IVA firm that specialises in offering more flexible IVA agreements for those with fluctuating incomes.
What will happen during an IVA?
As soon as your IVA is in place, all of the interest on your debts will be frozen. This means that your debt amount will not continue to grow uncontrollably.
During your IVA your creditors will not be allowed to take you to court or to hassle you with demands for payments or threatening letters to try to recover the money directly from you.
This can bring you immense relief and allow you to relax and get your life back on track without the constant worry of debt hanging over your head.
This breathing space can be very beneficial and has helped a lot of people to improve their circumstances by getting a better-paid job, working overtime or taking on more responsibility at work to earn a raise.
Because your circumstances can change a lot during your IVA term, each year your IVA will be reviewed.
This means that you will need to submit your bank statements and wage information to Carrington Dean. Should your circumstances improve over time, then you will be required to pay more into your IVA.
Your finances will be reviewed and a new payment plan will be worked out to cover the next year. This will mean that your payments will be increased to your creditors each month.
What this can mean in real terms is that 50% of any pay rises, increases in wages or overtime earnings will be added to the amount of your monthly IVA payments.
Should you inherit any money or gain a lump sum of money from any outside source, then usually the whole of this payment will go towards your IVA.
Changes to take into consideration
You will also need to work with your Carrington Dean to come up with a plan in the event of any major changes that may affect your regular payments.
Work out how you will cope:
- If you need to replace your car
- If you need to move home (your IVA can seriously affect your credit rating)
- If your mortgage payments increase
- If the cost of living goes up (petrol, household bills etc.)
Taking on an IVA with very little wriggle room can soon leave you with problems if you don’t have any flexibility built into your plan to cover these or other issues.
Remember that your IVA will last for five years (or maybe longer) so a lot of small changes can build up. This is why it is so important to have a yearly review of your IVA to adjust your monthly payments up and down to consider any changes.
What happens if I cannot pay my IVA?
No one knows what the future has in store for us. Although your IVA will be reviewed on an annual basis, this doesn’t mean that your IVA payments will continue to go up each year.
Should your circumstances become worse for whatever reason, then you will need to talk Carrington Dean as soon as possible.
In most cases, you may be able to have your IVA payments suspended for anything up to nine months. Sometimes this can be longer under certain circumstances as long as your creditors agree to this.
If you suddenly lose your job or become too sick to work through illness or injury, then you need to make your IVA firm aware so they can take action to either suspend, reduce or renegotiate new terms on your behalf with your creditors.
What happens if I need to stop my payments?
Depending on your circumstances and the reasons behind you needing to suspend your IVA payments, the months that you miss your payment will usually be added on at the end of your IVA term.
This means that your IVA agreement will continue after the original five-year term has elapsed.
There are lots of cases where people have needed to suspend their payments and are still paying off their IVA after seven or eight years or more.
What if I cannot release equity in my home?
As mentioned before, if you have equity in your home, then you will have to look at remortgaging your house to release that equity and put this towards your IVA.
If you cannot get a remortgage, then what will happen here is that your payment terms are usually extended for another year.
Should you have already taken some payment breaks, this can make your IVA drag out for much longer than the original five-year plan at the beginning.
You may be able to take out a secured loan if you cannot get a remortgage. However, look very carefully at the repayment terms and conditions. Some lenders are being overly harsh towards loan applicants carrying an IVA.
It has been reported by some loan applicants that they are only being offered loans with very high rates of interest or overly long repayment terms of over 10 years. This isn’t what you want to be taking on at the end of a five year IVA.
How to find a trusted IVA company like Carrington Dean
Before you jump in and choose an IVA firm like Carrington Dean to work with, make sure you get some independent advice. Go and see someone from your local CAB to discuss your circumstances, or contact the National Debtline for advice about your financial situation.
Taking out an IVA is a huge decision so you will want to know it is the right thing for you to do.
It is of vital importance that you find the very best help with your IVA by using a tried and trusted company to work with. After all, you will be sharing a lot of your personal details with them and will also be working closely with them for at least the next five years.
You will find that IVA companies like Carrington Dean will vary in their quality and services as well as the fees being charged.
It will be worth your time taking a very close look at several different IVA companies before deciding on the one to go with for your IVA.
You can look for a list of local insolvency practitioners by searching the insolvency practitioner directory. From here you can check out their history and find a company that is a good fit for your needs.
Doing your own IVA without Carrington Dean
How do I get an IVA
Not everyone is eligible for an IVA and they’re only suitable for those who have a regular income and can therefore commit to regular monthly payments towards their debt. You generally need to owe at least £7,000 and be struggling to make payments to unsecured lenders.
To obtain an IVA you can’t do this individually and you would have to go through an insolvency practitioner like Carrington Dean, who will then take all necessary details from you and work out what payment is affordable. They will then contact creditors on your behalf and discuss the IVA with them and if necessary apply to courts for an interim order to prevent creditors taking any action against you whilst the IVA is set up. The insolvency practitioner is also able to cancel the IVA if you don’t keep up repayments.
Advantages and Disadvantages of an IVA
- Any remaining unsecured debts after the IVA is completed will be written off and you will be legally debt free
- The IVA generally will mean that you will not continue to pay additional interest to creditors on debts
- It is possible to include agreed payment breaks as part of an IVA, if agreed with creditors
- An IVA can help you to avoid losing your property to pay off debts, you may have to consider re-mortgaging though
- Your creditors will no longer be able to contact you directly once the IVA is agreed to and in place
- An IVA can have a very negative effect on your credit rating in the medium to long term and therefore severely affect your ability to obtain credit in the future
- Most of your disposable income will have to go towards paying the IVA
- It is possible that your creditors will not agree to an IVA
- Your IVA will remain on the Insolvency Service Register
Alternative to an IVA
An alternative to taking out an IVA is a Debt Management Plan. Here are the main ways in which a DMP varies from an IVA:
- A DMP will continue until all the debt is repaid
- There is no guarantee that interest and charges with creditors will be frozen
- Creditors are still able to get in touch with you directly
- A DMP is not legally enforceable
Ultimate Guide to Debt Management with Carrington Dean
Why do people get into debt?
When people fall into debt there is a common misconception that they have been recklessly spending their money and living the high-life racking up bills on their credit or store cards.
In fact, most people fall into debt through suffering a crisis such as losing their job, being made redundant or falling seriously ill.
All of these issues are very real and very common! They can happen to anyone at any time and can financially cripple even those who are very careful with their money.
Having to adjust your personal finances to adapt to changes such as a divorce or death of a partner, poor health or a job loss can lead you to struggle to pay not just your debts but your household bills, rent or mortgage.
Questions to ask yourself if you think you have a debt problem
- Do I feel anxious about managing my debt repayments?
- Am I struggling to pay the minimum payments towards my credit cards?
- Is it a struggle to pay my rent or mortgage each month?
- Do I avoid answering telephone calls from unknown numbers?
- Do I feel a sense of dread when letters from creditors come through my letterbox?
- Am I unable to save any money for a crisis such as car expenses or emergency repairs?
If you answered ‘yes’ to any of the above questions, then you may want to consider seeking independent help or advice from a financial expert.
How do I get help?
You can get free financial advice about handling your debts through your local Citizens Advice Bureau or via charities such as Christians Against Poverty or the Debt Support Trust.
All of these places offer free debt advice and can help you decide which path to take to help resolve your debt issues according to your individual circumstances.
There are also charities Such as Step Change that will work with you to help set up a debt solution such as a Debt Management Plan (DMP) or an IVA (Individual Voluntary Arrangement).
It is also useful to know that there are lots of businesses such as Carrington Dean that offer Debt Management Plans, some will offer their services for free but others will charge a small fee.
It is important that you choose the right Debt Management Plan (DMP) provider to suit your needs. Results will vary so it is worth looking at the history Carrington Dean and reading their client testimonials to make sure they have a solid track record.
If the idea of a DMP appeals to you then you should discuss this with your debt advisor.
What will Carrington Dean do to help me?
It is a good idea to talk things through with Carrington Dean, especially if you are carrying a lot of non-priority debt and you decide that a Debt Management Plan is probably your best option.
The debt solution that is best for you will depend on your personal circumstances and having the help of Carrington Dean can make you realise which route is best for you and clarify which of your debts carry the most priority.
Don’t forget that you can get debt advice for free so you have nothing to lose! Carrington Dean can help you make the right decisions, especially if you are overly stressed by your debts and cannot think clearly about your options.
Carrington Dean will help in the following ways:
- Can suggest ways of dealing with debts that you might not be aware of
- Check that you have applied for all the benefits that you are entitled to
- Keep what you tell them confidential
- Offer advice about managing your money
- Will never judge you about your situation
Meeting with a debt advisor can give you the relief and clarity of thinking you need to find a positive solution. You may only need one appointment with them and come out of your meeting feeling more positive about your future.
If you are certain that your best course of action is to have a DMP put in place, then you can now focus on finding the right DMP provider to meet your needs.
What is a Debt Management Plan?
A debt management plan (DMP) is a way to resolve your outstanding debts by paying it back at a rate that you can afford.
A DMP may not be suitable for everyone carrying debt so it is worth taking some free advice to make sure this is the right path for you.
DMPs are good if you are carrying non-priority debts such as credit card or store cards debt, bank overdrafts that you cannot pay off and unsecured personal loans.
How do Debt Management Plans work?
Your Carrington Dean will act as your middle-man between you and your creditors. They will look at your financial situation, take into consideration your wages, your monthly household outgoings and work out an affordable payment plan.
They will talk to your creditors on your behalf so you don’t have the extra pressure of having to deal with them yourself.
Your Carrington Dean will set up an agreed monthly payment plan with you and then will pay your creditors a share of the money you give them each month towards your debt.
The beauty of this is that you will only pay one fixed monthly payment to Carrington Dean each month which makes it much easier for you to budget as you will not have lots of different amounts of payments going out at different times of the month to your creditors.
What are non-priority debts that can be covered by a Debt Management Plan?
You can only set up a Debt Management Plan to help pay off non-priority debts.
These debts may include:
- Bank or building society loans
- Bank overdrafts
- Borrowed money from friends or family
- Catalogue debts
- Credit card debt
- Payday lender loans
- Store card debts
- Unsecured personal loans
What debts don’t Debt Management Plans cover?
You cannot use a Debt Management Plan to manage your priority debts.
Priority debts include:
- Council Tax
- Court fines
- Hire purchase agreements
- Income Tax
- Loans secured against your home
- Mortgage or rent
- National Insurance
- TV Licence
- Utility charges such as your gas and electricity bills
Do all DMP providers work in the same way?
It is important to know that you can get help from a DMP provider for free. Obviously, the advantages here will be that you will not be paying the company any fees for their help.
Using a free DMP provider does mean that what money you would be paying in fees would instead be going towards paying off your debts.
However, you should also be aware that there can be a very long wait to get on the books for a service-fee free DMP provider. In the meantime, you could find yourself spiralling further into debt or struggling with the pressure to pay coming from your creditors.
You can choose to go with a fee-paying DMP provider like Carrington Dean and receive a much quicker service as these companies will have more staff available and can take on more clients.
No matter whether you choose to go with a free service or a fee-paying provider, you will be relieved to know that absolutely all Debt Management Plan companies including Carrington Dean have to be authorised to operate by the Financial Conduct Authority (FCA).
This is to ensure that the company meet its agreed standards. However, before you sign up to take out a DMP plan with a provider, check they have been authorised by the FCA.
You can check whether Carrington Dean FCA authorised by looking on the FCA website at www.fca.org.uk
Where to find a DMP provider
There are several ways to find a registered DMP company. You should first try searching via:
- Your local Citizens Advice Bureau
- Checking with National Debtline and asking for a referral
- Searching the internet for debt management companies
- Looking in the Yellow Pages under debt adjustment and management
If you talk to a debt advisor, they can recommend a company to go with. You may have a friend or family member that has also used a DMP with great success. You could ask who they used.
What to ask Carrington Dean
You can have a look around for a good DMP company to work using the suggestions above, but you will often find that there are so many providers to choose from that deciding on just one can be confusing.
Remember that you will not be making any commitments to these companies by asking them questions. Make sure you get all of the information you need before agreeing to work with one.
After checking that Carrington Dean is registered with the FCA, you should contact them for more information.
Under FCA rules and regulation a registered Carrington Dean must provide you with the following information:
- (For fee-paying services) provide an explanation that should your first payment go to the provider rather than your creditors, that your arrears will increase
- A DMP may affect your credit rating
- Not to ignore letters and contact from creditors
- Stress the importance of meeting priority payments
- That creditors are not obliged to freeze interest and therefore the total amount of debt to be paid may increase
- That your creditors are not obliged to accept your payment proposal
- That your creditors can still continue with actions to recover the debt
- Where to obtain free debt advice
If Carrington Dean fail to supply you with the above information or you find that they are not FCA registered, then you should carry on searching for a better DMP provider.
Being authorised by the FCA means that you will be treated fairly. Should anything go wrong with your plan, then you will be able to make a complaint to the Financial Ombudsman Service.
Choosing a quality Debt Management Plan provider
It is also worth checking to see if Carrington Dean is a member of a trade association. If they are a member this means that they will have a strict code of practice to follow.
This means that their services are audited regularly to ensure that they meet with their obligations and follow a set procedure to handle customer complaints.
Should they not follow a strict code of practice, you can refer your complaint to the trade association for further investigation.
Is it worth going with a provider that is a member of a trade association? Absolutely, yes. This will give you some extra peace of mind knowing that you have chosen a professional DMP provider.
What you should look for is that Carrington Dean is a member of the Debt Managers Standards Association (DEMSA).
The DEMSA has a very strong code of practice that has been approved by the Trading Standards Institute Consumer Codes Approval Scheme (CCAS).
Another couple of check you can do before you commit to a provider is to see if the company is a member of DEMSA by checking at www.demsa.co.uk and also if they are a member of the DMP protocol scheme.
The Debt Management Plan (DMP) protocol, was set up by the government’s Insolvency Service. Although membership of the protocol scheme is voluntary, any provider that signs up to this has committed to meet with standards over and above those required by the FCA.
What will my Debt Management Plan give to me?
Once you have selected a DMP provider like Carrington Dean to work with and a plan is agreed, they will be able to supply you with the following information about your payment plan:
- The total cost of your DMP
- How much debt you will be repaying over the course of the DMP
- How long your DMP agreement will last for
This will be the information that you will be given at the beginning of your agreement plan. You may find that the details will change in cases where Carrington Dean hasn’t yet finalised an agreement with one of your creditors.
It can often be the case that one or more of your creditors may be dragging their feet over the negotiations or are taking longer to respond than other creditors.
In this case, your agreement should have a clearly written statement that your figure is an estimate only and will be finalised at a later date.
Your written contract will also include details of the fees that you are liable for. This could include any monthly fees, a deposit or up-front fee payable at the beginning of your agreement.
Always check the small print and only sign if you understand everything written in your contract. You can query anything that you don’t understand with your provider for a clear explanation.
Remember that if you don’t like the idea of paying fees for your DMP then you can always choose to go with a free DMP provider instead or manage your own debt management plan. Read on..
Managing your own debt without Carrington Dean
What is a debt management plan?
A DMP allows an individual to pay off their debts at an affordable rate. You can choose to work with a DMP provider like Carrington Dean who will work on your behalf to negotiate with creditors to agree an amount that is affordable for you to pay and then set up the payments to the creditors to be paid each month. The purpose of a DMP is to help individuals to lower their monthly repayments. When setting up a DMP you are requesting that your creditors accept lower payments that you originally agreed to.
The three main providers of free DMPs are Stepchange, Payplan and National Debtline. There are also many fee charging providers to select from like Carrington Dean. It is however possible to create and run your own DMP.
Debts that can be paid off with a debt management plan include those such as:
- Store cards
- Personal loans
- Bank loans
- Credit cards
- Money owed to relatives or friends
Debts that can’t be paid off with a debt management plan include:
- Hire purchase agreements
- Child maintenance
- Court fines
- TV license
- Council tax
- Tax bills
Creating a Debt Management Plan that Suits you
Before considering setting up your own DMP you need to think about how you are going to manage your debts that are a priority and a DMP will not be able to cover, for example mortgage or rent payments. If you feel as though you are not going to be able to afford to pay off these debts then you need to consider other alternatives to a DMP. If you fail to keep up repayments on priority debts the consequences could be severe and could result in a worst case scenario of losing your house or ending up in prison.
If you decide to go ahead with setting up your own DMP you need to consider how much per month you can realistically afford to pay towards your debts and to create a budget for this, because you don’t want to end up in a position where you cannot afford to pay out the amounts you have agreed to within your DMP. You need to consider your priority debts and then other outgoings such as fuel, groceries, council tax and anything needed for everyday life. It is useful to use an income and expenditure sheet which will show how much spare money you have and can also be sent across to creditors. If during the DMP your income increases you do then have the option to either increase monthly payments or even often settlement figures you are willing to pay to your creditors.
Steps to getting a DMP up and running
- Firstly ensure you have a plan in place to pay priority debts
- Cancel any direct debit or other forms of payments to the rest of your outstanding creditors
- If your existing bank is one of your creditors you will need to change your bank account to a different bank
- You will then need to write to your creditors and send them across the income and expenditure sheet you have created, to show how much you can realistically afford to pay towards your debts
- Then you can start to set up regular new monthly payments to your creditors for the amount you have stated in your letters
- Don’t respond to any initial letters and calls from creditors immediately after setting up your DMP as it is possible they have either not yet read your letter or processed it
Ongoing management of a DMP
Once the DMP is up and running it is usually as simple as just ensuring the payments are going out of your bank account to creditors every month. There are a few things that can sometimes happen, especially within the first few months of a DMP:
- A creditor may take out a county court judgement (CCJ) to try and recover debts. It is unlikely if you are communicating with your creditors and have informed them of the monthly payment you are intending to make, but it does sometimes happen. If you find yourself in this position then it is a good idea to get some advice from the National Debtline or your local Citizens Advice Bureau. You will need to return the court form with details of your financial situation and your agreed payments under the DMP
- Sometimes you may receive communication from a creditor asking for a review of the DMP, often within the first year. Just reply informing them that your situation is the same if it hasn’t changed, or include a new statement of affairs or income and expenditure sheet if it has changed
- It is possible that one or more of your creditors will take the decision to sell your debt onto another firm. If this happens you just need to communicate with the new creditor to enable you to be able to change the standing order bank details to theirs.
Debt Management Plan Conclusion
Most people do choose to use a firm like Carrington Dean that specialises in debt management plans than to run their own DMP, but there are still plenty of individual who choose to manage their own. If you like the idea of having control of your debts and not relying on anyone else to manage them then a self-managed DMP may be a good solution for you. If you have a large amount of creditors however you may want to consider choosing a firm like Ashford to assist you in setting up a DMP, as the more creditors the more work required. As previously mentioned, if after completing an income and expenditure sheet you realise you are going to struggle to afford your ‘priority’ debts, you will need to look at alternatives to a DMP, whether self-managed or not.
Ultimate Guide to Debt Consolidation with Carrington Dean
What is Debt Consolidation?
This is actually a form of loan, and it works by taking all of your existing debt and pooling it into one place. You combine it all into one new loan, so all the old stuff is paid off, and you are left with this one new one that you can manage each month.
Sometimes, people do this themselves by taking a bank loan out to pay credit cards off and then pay the loan back every month. However, debt consolidation is a little bigger than that and usually for larger debts.
There are two types of debt consolidation loan; secured and unsecured. Below, you will find a little more information on how each of them works:
- Secured. These are loans that are secured by something you own, like your house or car. This means that if you are no longer able to pay, you risk losing your home or vehicle to the loan company. It can be an exceptionally risky move.
- Unsecured. This leaves all of your assets free, so there is no risk of losing your home, but because of this, it is usually a more expensive way of borrowing. This means there is extra interest or fees.
What About Using the Bank?
This is something I touch on in following sections, but there is the question of just using the bank or another credit card as a form of consolidation loan. The answer is that these are perfectly feasible solutions, but only if your debt is relatively small; under 10k. Anything over this, and you will be hard-pressed to find a bank or credit card that will say yes.
If you have a lot of debt, there is also the option of remortgaging your home. This is quite a popular solution because it gives you some financial freedom without the pressure of a loan with a new company. You will need to remember that your mortgage payments will go up each month, and have to consider if you can afford that kind of commitment. It tends to be quite a secure form of consolidation as well, because you aren’t risking anything more than you were before.
When to Consider a Debt Consolidation Loan
The question is, when do you know that this is the right path for you? It’s a good question because it can be pretty tricky to know when you’re in way over your head, and when you actually have debt that can be managed with better discipline and budgeting. Here’s how you know when debt consolidation needs to step in:
- Your non-mortgage debts are more than a year’s salary.
- You are borrowing with too many people and becoming overwhelmed.
- The interest/fees on a debt consolidation loan are lower than what you are currently paying.
- They are your last resort.
Things to Consider Before You Proceed
You really need to think things through before you agree to a consolidation loan, and there are a few aspects to take into consideration. Such as:
- Can you afford the monthly repayments?
- Will you be better off with debt management?
- Have you tried every other option?
- Do you know if your financial circumstances will be changing soon?
- Have you picked a reputable company, and are there any hidden fees?
What if You Have a Bad Credit Rating?
This is a common question, because many people who are in debt have a poor credit rating. The good news is that it doesn’t automatically mean that you won’t be approved for a consolidation loan. In fact, it often doesn’t matter because the loans were designed to help you and so they will take lower credit scores into account.
However, this isn’t what you need to worry about. A bad credit rating means that you may end up attracting a higher rate of interest. This means more debt, and more money to pay over time; a dangerous trap to fall into. This is why you need to check all your options carefully before you commit, because you could end up with a very bad deal indeed.
Carrington Dean Debt Management: Could it be for You?
Sometimes, debt management with a company like Carrington Dean is what you need instead of a new loan. Of course, it depends on everything we have already been through in the above sections, but it might just work. Let’s go through some of the steps for debt management:
- #1 Check your budget. How much are you spending each month? Are there areas where you can cut back so that you can afford your current debt repayments? Are there subscriptions that you don’t actually need? It’s amazing how much you can save by just making and/or checking a budget.
- #2 Look for Government help. Check to see if there are any help schemes that you are eligible for, especially when paying your mortgage. The government mortgage loans tend to be very affordable, and can be a massive help. Equally, you can also check if you are eligible for any benefits.
- #3 Shift your debt. Can you move it over to cheaper credit cards that come with 0% interest periods and less expensive interest overall? This can make a massive difference, as well as reduce monthly payments. You can often do the same with existing loans.
- #4 Help with bills. Have massive arrears on gas, water, and electric? Give the company a call and ask for help. Many of them have schemes available where they will offer you grants and support so that you can get through your difficult period without losing access to your basic needs.
- #5 PPI. I’m serious. I know those calls are exceptionally frustrating, but there is some merit to them. If you have existing loans, you could actually be eligible for PPI. All you need to do is find a reputable company that can investigate this for you and potentially help to reduce the amount that you owe. If it comes through, it could be a very rewarding experience.
How to Tell a Debt Consolidation Company is Safe
This is essential knowledge, because there are so many companies out there promising these amazing consolidation loans that seem too good to be true. Spoiler alert; they most likely are. Before you choose your company, you need to make sure they are actually safe to use. Here are a few of my top tips:
- Avoid off of the companies you see on TV or in newspapers; they tend to have the worst fees and interest rates that will only make things worse for you.
- Check out their reviews on companies like Trust Pilot.
- Make sure they are registered with the FCA, if they are not; steer clear.
- They should be completely transparent about their fees. All up front, no small print.
- When you talk to a representative, they should be open and understanding, not trying to push the sale on you throughout the call.
- Take time to choose and research. Debt can cause severe stress that will cloud your judgement. Do your research, consult friends and family, and make a choice that you know is going to work for you in the long run.
The Advantages of Debt Consolidation Companies
Of course, there are some great benefits to choosing a debt consolidation company:
- You may end up paying less over time because everything is in one place.
- Debts are easier to manage and can be paid off in a shorter timeframe.
- Improvements to your credit score as old debt it paid and new debt are managed.
- Learn better money management and how to take care of your debt through representatives and company schemes.
The Dangers of Debt Consolidation Companies
Not everything is perfect with these companies, however, and you may find yourself in hot water if you aren’t careful. Here are a few of the potential downsides:
- You could lose your home or vehicle with the secured loan.
- Hidden fees and unregistered companies post a massive threat to your finances.
- Rates can be variable, which means that interest rate may rise over time.
- It could end up costing more in the long run because of the above.
How to Get Started with a Debt Consolidation Company
Before I even get into this section, I want to offer some advice. Instead of going straight to the company, it is a good idea to see free and impartial advice on your plans to take out the loan. There is a whole load of charitable companies that will provide you with this financial knowledge so that you can determine if you are making the right choice for you, your future, and your current situation. Once you have done that, you can use the steps below.
Being sensible plays a large part in choosing a company, and following all of the advice above is the best way to pick someone reputable. Once you have a selection of loans to choose from, how do you get started with it all? It can vary between companies, but these are the basic steps:
- Contact each of your chosen companies and fill out an application. These are usually provisional and give you a rough estimate of how much you would be able to borrow and the kind of rates to expect.
- Speak to them on the phone to get a clear idea of what they are offering you, and if there are any hidden fees or variable rates that you need to watch out for.
- Decide on the kind of loan you want, the repayment period, and the amount you wish to borrow (based on the numbers given) from your chosen company.
- Fill out the real application form accurately and wait for approval.
Renegotiating with Your Lenders
Communication is so important when you are in debt, and companies need it. You will have a better chance of negotiating if you actually keep your lenders updated and let them know what is happening. They want you to be able to pay them back, and many of them are willing to help. If you have masses of debt and are struggling to pay it off, you may be able to negotiate the following:
- A new payment plan that suits you (temporary or permanent)
- A reduction of your overall debt
- The removal of your entire debt (rare, but possible)
It’s all about communication, and you need to stay on top of it if you want to have a better chance of making things easier for yourself. This goes for everyone including, but not limited to:
- Credit card companies
- Government and council
- Electric, gas, and water companies
- Phone and internet providers
The wise words debt is a symptom; not the condition should be ones that stay with you. It’s only temporary, and it can be managed. It’s easy to let it get out of hand, and it can be hard to manage when you reach this point. Using a debt consolidation company to pool everything together can really help to make things easier to manage as well as bring you some relief. However, you do need to be careful that you are using a reputable company, and not one that is only looking to make money out of you. As long as you follow the advice above and tread carefully, you should be well on your way to a debt-free future.
Consolidating your own debt without Carrington Dean
What is debt consolidation?
In the simplest terms, debt consolidation is the name given to a loan that is then used to pay off all your other existing, unsecured debts. You can take out this type of loan to pay off a variety of types of debt including store cards, credit cards, personal loans and also catalogues too.
The main reason that many people take out a debt consolidation loan is because it means that you only have one monthly payment to make, rather than having to manage and make several different monthly payments to pay off your debt. Having just one monthly payment will make it much easier to manage and take control of your finances as well as making sure that you do address the debt you have too.
Whilst debt consolidation does work for many people when it comes to your debt, it doesn’t always work for everyone. In fact, taking a loan of this type out can lead you to be in a worse financial situation then you were originally in, which is not a positive place to find yourself. it is important that you consider whether or not debt consolidation is going to work for you, before you take any form of borrowing out.
Can I do debt consolidation without Carrington Dean?
You don’t have to use a debt consolidation company to consolidate your debts. Most lenders now have sophisticated application flows that make it easy for you to consolidate your loans. If your finances are particularly messy, you may want to consider using the help of a Debt Charity such as StepChange or a debt management company.
Is debt consolidation the right choice for me?
As we mentioned earlier, debt consolidation isn’t always the right choice for some people, when it comes to their debt situation.
The repayment amount is likely to be higher
One of the main reasons for this, and one that you should always carefully consider before you make any moves, is that the monthly payments are likely to be higher than what you pay across the other debt already. For some people this can be too high a cost and end up leading them into more debt than they were in, in the first place.
So is the interest rate
Another important thing to remember about debt consolidation is that these types of loans often have a higher interest rate applied to them than individual borrowings. A higher interest rate means that in the long term you are going to pay off more money to the one provider.
The loan term may be longer
Along with the higher interest rates, consolidation loans often last longer than you may have thought that your original debt would have lasted. Although, in actual fact, if you were only paying the minimum amounts off of your other borrowing, then this could have taken you years (or even worse an undetermined amount of time) to pay off.
You need to think about the fees
There is a good chance that when you take out a consolidation loan, that the company who lend you the money will charge applicable fees to the borrowing. They may offer to add these fees to your borrowing (a tempting option to those who are already finding it hard to manage their finances) however in the long run this is only going to add to the amount that you need to pay off.
Not only do you need to keep these fees in mind, but many lenders will also charge you penalities for missed or late payments, which is going to mean that you will end up having even more money to pay off.
These are all things that you should consider before taking out a debt consolidation loan and you should always make sure that you read through the terms and conditions before you agree anything.
What is the difference between unsecured and secured debt consolidation loans?
If you are looking into whether or not debt consolidation is going to be right for you, then chances are that you are going to hear the term unsecured and secured.
These two types of borrowing do have some key differences that it is important that you get to grips with before you agree any contracts.
Secured debt consolidation loans
A secured debt consolidation loan is when the loan that you take out is secured against your property, essentially it is a little like a second mortgage. If you find yourself unable to make the repayments every month, then you are putting your home at risk of being sold to raise the required funds.
A secured loan is, however, usually a cheaper option to take out than an unsecured loan, as there is a much lower risk to the lender that they would end up out of pocket. This means that they will often give lower interest rates and lower fees to take out the loan.
That said, these loans have a much higher risk level for you. You never know where your life may take you in a few years and having the added strain of possibly losing your home due to missed payments on a loan, that in essence was used to eradicate unsecured debts, well that is never something that you want to happen.
Unsecured debt consolidation loans
In comparison, an unsecured debt consolidation loan is what is often called a personal loan. It is taken out in order to help people to try and stay on top of their finances and pay off their debt in one place. These loans are not secured against any property, which means that if you miss repayments your credit score will be affected, but your home will be safe.
These loans often have a higher interest rate and will have attached fees to set up and then for missed payments etc, however, they will also be more able to work with you to try and get your money back on track (and their repayments made of course).
Can I afford to take out this type of loan?
Another important question that you should be asking yourself is whether or not it is financially viable for you to take out and make repayments on this type of borrowing. Whilst you may only have to think about one repayment to one lender every month, you are going to swiftly realise that this repayment is much higher than you might have realised.
If you are already struggling to make the repayments that you currently have, then you need to ask yourself whether or not it is viable that you are going to be able to afford the repayments on the loan if you do take it out.
You need to assess your incomings and outgoings and give serious thought to how this monthly payment will affect you. If you can afford it and still be able to pay other bills and necessities, then it could be a good option for you. If you work things out and find that there is a good chance that you won’t be able to make the repayments, then it is not going to be a wise idea for you.
What do I do after a debt consolidation loan?
If you do decide that debt consolidation loan is the best option for you, then one of the most important things that you can do is to view it as a method to pay off your debt, for good.
Use the money within the loan to pay off all the other debt that you have and then close those accounts, cut up the cards and stop the borrowing. If you don’t do this then you can find that those empty balances, that clean slate, well that is far too tempting for you not to spend.
Failure to do this will mean that not only will you owe the money from the loan, but you will also then build up the debt all over again and you could end up owing double the amount in a few years time. Not the place that you want to be.
There are plenty of places that you can turn to for advice on debt consolidation, whether that is something that you want to do through a specialist company like Carrington Dean or whether it is something that you want to do off your own back.
Final words on Carrington Dean
There isn’t much worse than being constantly faced with debt and impending financial ruin. It can feel overwhelming, and as though things will never get better, but this isn’t true. All debt can be paid off, and your life can return to normal – you just need to be smart about it. Carrington Dean would be a fine choice if you feel like you don’t have the time or energy to manage your own debts.