When you are desperate to clear your debts, you look into as many options as you can. And, those options have been repeated by well being comments via this site. They are all top tips and good advice, however this is what I have found out.
There are many ways to help with debt and financial difficulty, some work, some don’t and some are not applicable sadly. What I have found out is that is depends on your debt and current situation. The factors that affect how you can get help are your job, the money you earn, who you owe money to and your health.
There are only 2 easy ways out of clearing your debt, and I use the word easy as your debt will be wiped out BUT your life as a future creditor is over. They are, of course, Bankruptcy and Insolvency. These 2 options come with drastic consequences but depending on your life situation, it may be a great move for you. For instance, if you were single with no kids and could start again, is losing your home to clear your debts a bad thing? Compare that with a family faced with the same option, and the single person can look positively at it. Insolvency is similar, but costs a fair bit of money to set up. It is unlikely you will have a spare thousand or 3 to set it up but you CAN include tax debt and it is unlikely you will lose your home.
Tax debt, we have mentioned it so many times, but any money you owe to the Government cannot be included in any conventional debt relief schemes and loans. I am stating this fact again so that you understand why I could not take up some of the options.
Loans – so many loans available, but in 2 categories. Unsecured and Secured. Unsecured is not an option for anyone with bad credit. It is a NO immediately. So, secured loans are an option. The drawback is obvious, you are moving all your debt into a loan directly against your home. The interest rates are quite high too. For example, I looked at a £25,000 secured loan and the amount to pay back was a hefty £33,000. Additionally, you can only borrow an amount that is comparitable with your equity. So if you have 10K equity, you can only borrow 10K.
Bad credit equals no new credit cards, so no consolidating balances onto different credit cards with lower interest rates.
Bank loans, again if you are honest you will lose. Sadly, I was too honest for my own good. Mention tax debt and it is goodbye sir, good luck. Quite why HMRC debts are ringfenced are beyond me. Same with mortgage payment holidays or partial payments, mention what it is for and it is a NO.
Debt Charities, wonderful for advice but really geared for smaller debt problems and often solved by re-budgeting or making key changes in your lifestyle. They do a wonderful job helping people but again, I would say this is for ‘normal debt’.
So what does work?
Well, for me, it looks like Insolvency. However, there is only one other thing that has helped me, and that was the use of a reputable debt consolidation/management company. I did my own research, found a good one that I will happily recommend them should anyone ask. It was the only option whereby I could include most of my debts and debtors and have them all move into a monthly lower payment. The company got my interest frozen for 12 months and a decent payment plan which meant, importantly, that I was still decreasing the balances. The cynical will state you pay a fee each month, and you are absolutely right to say that. I pay £30 month fee, now if you compare that to the combined interest of all the bills which was £136/month then it was worth it. The extra money left allowed me to pay back 2 other loans.
To summarise, research all options and don’t go with the popular choices. Not all of them are a fit for individual circumstances, most importantly don’t ‘panic sign up’ to things. Honestly, if you have a tax debt like me then don’t waste your time on standard solutions, as it cannot be included.
It is a world geared towards the wealthy, if you are down and out you have to fight like mad to recover from it or get really lucky. That is how I have found it to be.