Recession-Proof Debt Solutions
Is debt consolidation the number one financial solution for me? As we are in a recession (according to the Ernst & Young ITEM Club Autumn forecast), there’s a real need for persons with debt problems to realise what is different between debt consolidation and the various other financial solutions available - and know which one might be the best solution for them.
To start, it depends on what the future holds. In a recession, it’s more than likely to be bad news - when consumer spending falls and companies start to lose money, many businesses are forced to make people redundant in order to stay afloat. For anyone who thinks their company might be laying off staff, consolidating their debts might not be the best idea.
What is the reason? One of debt consolidation’s best benefits is the ability to lower the monthly amount a person pays towards their debt repayments. A debt consolidation loan is most effective when the individuals financial situation is reasonably stable: when they know how much they are earning and how much they are spending each month, they can figure out the best way of making debt repayments.
So a person facing the possibility of unemployment might be better off looking into debt management, rather than a debt consolidation loan. Debt management makes it possible to have a flexible approach to debt: borrowers are able to ask debt management professionals to get in contact with their creditors on their behalf, asking them to think about accepting lower monthly payments, remove charges and/or freeze interest.
Individual Voluntary Arrangements require a high level of commitment and need people with their own homes to release some of the cash in their property. Borrowers are required to commit to making fixed monthly payments for (often) six years, based on the maximum they can afford when they have taken their essential monthly costs into account. Even so, an Individual Voluntary Arrangement could make all the difference - for people whose debts have steadily got out of control, as well as persons faced with a sudden fall in their earnings. Granted, Individual Voluntary Arrangements do require a level of financial stability: if the person doesn’t feel they can commit to five years of regular payments, an IVA (Individual Voluntary Arrangement) might not be the best debt solution for them.
Discover more about debt consolidation, debt management & IVAs here.
