The real debt solution is keeping you away from debt or being on a “financial diet.” Had you known it would reach to this point, you could have put your best efforts to live frugally. But, there’s no time to sulk. Your finances are at stake, so you have to find a solution. Doing more effort in your business might not be able to help much now since you are already in the pitfall.
When you feel the whole world is on you because of your debts, then you might think about debt solution or debt settlement. Debt settlement means involving or asking help from advisors or third parties to settle your debts.
What can debt solutions do to help you? This is the question we have to answer in this article.
Some people say that debt solution or settlement is a niche solution. If you are burdened with substantial debt, then try to consider going this path. But, no don’t decide yet, you have to do your research if it benefits or damages you.
How Does Debt Solution Works?
Debt solution works this way. Typically you approach a debt solutions company. That company will act as a middleman between you and the lender. They have two goals: first is to make your situation look desperate. This way the lender will settle. The second goal is to create lump sum amount thus giving more reason for the lender to settle.
To achieve the first goal, the company will ask you to stop paying your lender. This gives the lender the idea that you are unable to pay your debt. This way the lender will be geared to be willing to settle. On the other hand, you will be asked to make a regular deposit to the debt solutions company to create the lump sum.
The major benefit of debt solutions is that is your only way to decrease your debt in less time. You can be completely out of debt within 24 to 36 months. After this, you can start to build your credit.
Your settled debts will no longer be subjected to collection proceedings, and you can start all over again this time in a much prudent manner.
What Is Individual Voluntary Arrangement or IVA and Its Benefits?
IVA which means Individual Voluntary Arrangement is an agreement made between creditors to pay all your debt. It’s also a way to avoid bankruptcy. IVA allows you to have an insolvency practitioner to act as your nominee and make a proposal to your creditors on your behalf. They will arrange with the lenders for you to pay an affordable amount.
The benefit with IVA is you will be free from debt in an agreed number of years. Once lenders agree, it is legally binding and can’t file a collection proceeding case against you. It is affordable. Your monthly repayments will depend on your income and outgoing. Affordability is considered in IVA.
There are disadvantages with IVA: although it is affordable, it’s quite an amount which you are compelled to pay per the formal agreement you signed. Your IVA record will remain on your credit for six years and for this period expect a low credit score.
Debt solutions can be made by using a debt settlement company or in the case of IVA an insolvency practitioner. To know whether debt settlement or IVA is for you, research and ask around for advice.