The perils of bad debt advice

Even though it can often feel that there’s no way out of bad debt, there can sometimes be quite a lot of options open to people who are facing debt problems. In fact, there are so many options that sometimes it can quite difficult to decide upon the best debt solution to suit your circumstance. So, how do you know who to listen to? Obviously, the right debt advice from the right person can help you to get out of debt. However, just because it worked for your relative, colleague or neighbour doesn’t mean it’s the right option for you. There’s also advice from a specialist debt advisers, who again can help you get out of debt. Always be sure that this debt advice is tailored to suit your circumstances and the debt advisor has a true picture of your financial worries, as bad advice could keep you in debt. In fact, it could make your situation even worse.

Recognising bad debt advice can be difficult, especially when debt pressure makes any possible solution a very attractive proposition. If you do go looking for answers to your debt problem, it’s important that you keep a level head and don’t rush into anything. There’s is no ‘one size fits all’ solution. Different debt solutions will be better suited to some people than to others, depending on their financial situation. A good place to start when deciding on the right course of action is the level of debt you’re in. For example, if you have amassed a selection of unsecured debts totalling £10,000, you may find that a debt management plan is the best way for you to address your debt. You might decide to consolidate these debts into a single monthly payment that takes you longer to pay off but is more manageable. There are a few ways to do this. If the debt is spread over credit cards, you might decide to transfer the balance to a card that offers a better interest rate. You could take out a personal loan to cover the different debts. Banks and credit unions often advertise specialist debt consolidation loans, solely for the purpose of combining your debts. There are a lot of different debt consolidation loans out there, so it’s important to choose the loan that best suits your needs.

If you’re a homeowner and have unsecured debts amounting to £12,000 or more, you might find that an IVA, or Individual Voluntary Arrangement, is the best option available to you. This is a formal agreement between you and your creditors, allowing you to make more manageable payments towards the total amount of debt. You pay off a percentage of that total and after about five years, the debt is considered settled. The level of monthly repayment is determined by examination of you income. Since the IVA has the potential to write off any debt that you cannot afford, it can provide an attractive alternative to bankruptcy.

Many people believe that bankruptcy is the only way to escape from debt but, for many, there are other alternatives to consider. Before deciding to declare bankruptcy, you should first consider the effect that filing for bankruptcy will have on your career, the effect on your partner or spouse, the stigma of publicised bankruptcy and its presence on your credit report.

Obviously, the various permutations highlight the importance of consulting a professional debt adviser before seriously considering any of the options open to you. The right adviser will help you to understand each of these options and advise you on the right way to go.

The wrong advice won’t necessarily come from someone aiming to mislead you intentionally. Often friends and family will be there to talk to and they’ll offer their advice, rightly or wrongly. The way they solved their debt problems might not be relevant to you, as your situation may be very different. That’s the key reason to talk to an objective, professional debt adviser.