Not to make an excuse for borrowers who default on their loan payments, but nobody envisages that they will one day fall short of the agreement they have with their creditors. If anyone thought that at some points, they would not be able to fulfill the terms of a loan, perhaps they would have asked for better terms or not even borrow at all.
But, you know, life can happen to anyone regardless of who you are or what your expectations were. And when life happens to you, what once seemed like an easy bridge to cross might now seem like a great hurdle.
Many a time, this is the situation most borrowers who seek debt help find themselves. They take out loans, set a repayment plan in place, and then life messes with them – job loss, death of a loved one, sickness, business revenue drying up, etc. All of a sudden, bang, they can no longer keep up with their monthly repayments, and now bailiffs are starting to ring their lines like they’re their new BFFs.
If this has been your loan history with creditors, I’m happy to inform you that you’re just a few minutes away from discovering some tips that will help you break free from the grips of debt.
Read on to discover the best ways to pay off your debt without stress.
Debt management plan (DMP)
The first strategy you want to try if you’re having trouble with your debt repayment is the debt management plan.
This strategy involves striking a new deal of agreement with your creditor so that you can pay back the rest of the borrowed money at an affordable rate.
Usually, you will need the help of a DMP provider to enter into a debt management discussion with your creditor because most creditors are often reluctant to enter these discussions with borrowers. But when they’re approached by a DMP provider, they tend not to balk. The DMP provider will try to convince them to accept less than the agreed monthly payment, highlighting your prevailing financial predicament as the reason why you can no longer meet the terms of the initial agreement.
But please bear in mind that the debt management plan strategy is only suitable for paying off non-priority debts, such as personal loans, auto loans, store or credit cards, and overdrafts.
Debt Relief Order (DRO)
Have you taken out a loan and hoped to pay back with your monthly paychecks, but now you’ve lost your job? Did you take a business loan to finance your business, and now the revenue you’re generating is not even enough to sustain the business, let alone meet debt needs?
If so, you need not stress yourself over your debt repayment matters because there is a scheme specially designed for people in your position.
It is called a Debt Relief Order (DRO).
Provided you have proofs to back up the claim that you’re currently experiencing financial hardship, you will be qualified to use the DRO to freeze your debt for up to a year. And if your circumstances still haven’t changed after a year, the DRO will completely write your debt off for you.
Individual voluntary arrangement (IVA)
Hmmm, IVAs, many debtors’ go-to debt settlement scheme!
The Individual Voluntary Arrangement, or IVA as it is most popularly known, is one of the best ways to repay debts without stress. Much like the DMP, an IVA involves entering into a debt management discussion with your creditor via an insolvency practitioner – a financial expert that does the negotiation for you.
As a legal binding, the IVA has the backing of the government, which means that once your creditor agrees to it, they cannot back out of it.
What makes an IVA such an interesting option for many debtors is the fact that it allows them to pay back what they can afford, while also extending the repayment term – usually, up to 5 or 6 years. At the end of the agreed term, any money left unpaid is written off by the creditor.
If you owe debts to many creditors but cannot afford to meet the monthly payments for all of them – that is, you don’t have enough money to pay all of them come month end – you can apply to a County Court for an Administration Order. An Administration Order is designed to help those borrowers who owe debts to many creditors and are being chased by bailiffs.
Once you get this order, you’ll agree to make regular monthly payments to the court for the full amount you owe. The court will then distribute the money to your creditors.
Writing off your debt
You don’t need to run from pillar to post if you can no longer pay back your debts. You can easily apply to your creditor to write off your debt.
Yes, you read that well. You can easily contact them to inform them that your financial situation is dire, and you can no longer meet up, and they should kindly consider writing your debt off.
Of course, you will need proofs to convince them that your circumstances are, indeed, dire and unlikely to change anytime soon.