How do I get out of debt? – 4 easy steps
Being in debt can be a stressful time but there are lots of ways to get out of debt. Once you take control of your finances you will be able to relax, sleep better and enjoy life. If you are struggling with overdue bills, loan repayments or rising debts, we can help you regain control over your finances. Our team of advisors will introduce you to a range of debt solutions which will remove your financial strain.
Do you want to be completely debt free?
We are all at risk of falling into debt and continuing to struggle without help can have a serious impact on our emotional and physical wellbeing. Get Out Of Debt Free are here to help, we can minimise your debts and provide you with the support you need through a variety of debt solutions, which could write off your unaffordable debts.
There are so many people in debt, which are struggling with persistent creditors demanding payments on overdue accounts with escalating interest amounts, but there are free solutions available which will stop all contact and lower your monthly payment amounts.
For many people wondering how to reduce their debt, it may seem like there are no options available. But, there are debt solutions which will consolidate your outstanding debts into one single affordable monthly repayment amount. By sticking to a plan for the agreed period it could be possible to legally write off up to 80% of your outstanding debts. The team will help you explore the options, so that you finances quickly get back on track.
Step One – Work out your total debt amount
Work out your total debt amount. Different debt options are suited to different amounts of debt. Write down a list of all of your unsecured debts. Unsecured debts include credit card debt, loans, payday loans, student loans, store cards and overdrafts. Your unsecured debts will nearly always hold a very high interest rate, which makes it very difficult to pay off the debt and sometimes it may feel impossible to clear the debt entirely. You may feel like you need to prioritise the debts which affect your home, rather than smaller unsecured debts like catalogues and payday loans. With a formalised solution, this can all stop now and you can get out of debt for good!
Write a separate list of your secured debts. Secured debts are debts which are secured by your home or car, such as mortgages and logbook loans.
Step Two – Make a list of your income and expenditure
Write down a list of all of your income. This could be made up of your wages, pension and any benefits you may receive. Your expenditure may be a little bit complicated, this will include all of the things you pay for on a regular basis such as rent, mobile phone bills for example. When you total your income and total your expenditure, work out the difference. If your different is a positive number, then you have a positive income and expenditure. If this is a negative number, then your income and expenditure will be negative. If it is a positive number, this is called your disposable income.
Step Three – Speak to the experts
Debt options can be a bit of a minefield. There is no magic way to get rid of all of your debts without putting money towards them. Even bankruptcy comes at a fee but there are smarter ways to reduce your debt whilst giving you generous allowances to be able to budget for all the things that you and your family will need.
Your advisor will be able to look through your situation and recommend the best debt solution for you. These will include:
Individual Voluntary Arrangement (IVA) – Generally speaking, IVA Advice will be suitable for yourself if you have a total debt amount of over £5000 and you owe money to two or more people. With an IVA, you can write off up to 80% of your unsecured debts. Writing off debt is the preferred choice for most people, as it will allow you to have a clean break and restart your financial history after a set period of time (usually 5 years).
You will need an expert to look into this option with you, as specific lenders can approve your IVA proposal and other lenders will not.
Debt Management Plan – This is an informal solution and involves making a plan directly with your creditors to reduce the payments and freeze interest on your debts. This is often not successful and should be looked at as a last resort as the lenders will have no formal agreement to stick to the agreed plan. A debt management plan will also have a detrimental affect on your credit rating and your future credit score, so it is always worth considering a more formal solution to your debt.
If you are in a position to repay the full amount owed on your unsecured debts gradually, but need the repayments to be reduced to become more affordable a debt management plan could provide the solution. It is possible to arrange an affordable debt management plan yourself, although most people choose to use the services of a professional company.
Scottish Trust Deed – If you are in Scotland you will need to look into a formal solution called a Scottish Trust Deed. These are similar to the IVA offered in England and Wales. The Trust Deed is a legal agreement between you and your creditors, in which you agree to repay an affordable amount each month to clear your unsecured debts over a period of 4 years.
At the end of the agreement period any outstanding amounts owed to your creditors are written off. It is a form of insolvency so to participate in a Trust Deed you will need to prove that your level of debt is more than the value of your assets.
Bankruptcy – Often seen as a last resort, bankruptcy will write off 100% of your debts although it will not allow you to keep assets such as your mortgaged house, in normal circumstances.
All of the schemes on our website are fully legitimate and are designed to help everyone eliminate their debt easily. The government understands that there are some people which cannot afford to pay their debts or keep up with high repayment amounts, so there are a variety of debt schemes which are fully supported by the government. There are laws in place to ensure you only need to repay an affordable amount each month. Some see bankruptcy as a quick option to stop bailiffs.
If your bankruptcy is approved an official receiver will be appointed to value your home and any other valuable assets, which may then need to be sold to repay some of the debts. There are a number of restrictions in place during the bankruptcy period which could affect your everyday life in terms of employment and future credit.
In most cases you will be discharged from bankruptcy after 12 months, although if the official receiver calculates that you have the ability to repay some of the debts you will be required to make monthly repayments for 3 years through an Income Payments Agreement (IPA).
Step Four – Relax
Relax knowing that your situation is now resolved. Being out of debt is an amazing feeling and this freedom should bring great happiness. Enjoy it!
If you have debts under £5000 and would like free help, we would advise you to contact Step Change Debt Charity. If you would like to seek help for mental health issues caused by debt, please visit the charity Mind.