Consolidate Your debts in Leeds and Birmingham
Consolidating your debts
If you’re thinking about taking out a single loan to pay off all your existing debts, make sure you’re not simply taking on more debt. Check that the terms of the loan – interest rates and length of the loan, for example - aren't too harsh. Be very careful about taking out a loan secured on your house as it will put your home at risk.
It's always advisable to seek independent advice before taking out any kind of loan.
Coming to arrangements with creditors
Once you've sorted out your personal budget, you can start to make arrangements with your creditors (peoplr you owe money to) about how much to pay. There are several options:
Informal arrangements
If you know you can't pay all your debts, it's important prioritise your debts and to write to your creditors to see if you can agree on a repayment timetable.
An informal arrangement isn’t legally binding, so your creditors could ignore it later and ask you to pay in full. See ‘Where to get help and advice’ below to find out where to get free, expert advice.
Debt management companies (DMCs)
DMCs offer help if you’re in debt (they usually only deal with ‘non-priority’ debts - see the link 'Find out more about non-priority debts' below). They negotiate with your creditors on your behalf in order to reduce the payments you are making overall. You then make one payment to the DMC which distributes it to the creditors.
Some DMCs are paid commission by creditors. However, most charge a fee, so you may have less money from your available income to settle your debts.
Many organisations, such as the National Debtline, offer free debt management plans, so there is no need to use a commercial service. See ‘Where to get free help and advice’ below for contact details.
- Find out more about non-priority debts
- Read more about DMCs from the Citizens Advice Bureau (opens new window)
Independent Voluntary Arrangements (IVAs)
If you can't work out an informal arrangement, you can apply to court for an IVA, where you formally agree to pay part, or all, of your debts over a period of time (typically five years). You'll need an insolvency practitioner to set up the agreement, and 75 per cent (by value of your debts) of your creditors must agree to it. Bear in mind that IVAs take several months to organise, and you may have to pay a large administration fee.
It is better for you to consider the IVA before Bankruptcy. This way the fees are included in the payment you make over 60 months.