The number of debt options can be overwhelming. if you’ve done your financial snapshot I recommend you check out the simple debt flow chart to find out the recommend debt solution for you should take.
The five main debt solutions
Snowball Method – if you can afford to make the minimum payments on your debt, then this method to become debt-free is almost definitely your best option. The great thing about the snowball method is that it actually improves your credit score, whereas the other options will damage it.
Debt Management Plan (DMP) – this solution has you paying less than the minimum every month and the lenders stop charging interest. Ideal for a short period if you have, for example, lost your job.
Individual Voluntary Arrangement (IVA) – this solution works well if you owe over £6,000 and need to protect your house from being repossessed.
Debt Relief Order – is suitable if you have debts of less thank £20,000, have barely any income and don’t have a house.
Bankruptcy – is for many people the fastest way to way to hit the reset button. Don’t be put off, there’s a lot of stigma around the word ‘bankruptcy’, however, it could be the right thing for you to do.
Less common debt solutions
Full and final settlements – if you have a lump sum of money, you can write to the lender to see if they’ll take a lump sum to clear the whole debt.
Write-off debts – this is where in special cases you can ask the lender to write off the debt so you no longer owe it. Otherwise, it’s very hard to do, unless there are extenuating circumstances like old age or dementia.
Get a refund on your Loan – the main way you can get a refund on your loan is if the lender has done something wrong like lent to you when you couldn’t afford the loan.
Comparing debt solutions
Undecided between two solutions? Here I’ve looked at some common options people have to weigh up.