The Tax Cheapo

Rather than struggling to keep up multiple payments to multiple debts, many people decide to consolidate their debts – repaying their smaller debts with one large loan. This means they’ll only have one payment to make per month, thus reducing the risk of missing a payment (and the charges and damage to their credit rating that can result).

Plus, a consolidation loan can come with a lower interest rate than unsecured loans. It can also give the individual the opportunity to think about their financial circumstances and arrange to repay the loan at a rate they can afford – again, repaying a debt more slowly will mean it takes longer to pay off and can end up costing more, so it’s vital to weigh up the pros and cons before proceeding.

Individual Voluntary Arrangements. A form of insolvency, an Individual Voluntary Arrangement is a legally binding agreement between the debtor and their creditors. If you owe around £15,000 or more to more than two unsecured creditors, an Insolvency Practitioner (IP) can tell you whether an IVA might be the best way for you to get out of debt. If they think it is, they can draw up proposal, detailing how much you can afford to pay towards your debts every month for the next (normally) five years, once you’ve taken your essential expenses into account.

If the right percentage of your creditors agree to the proposal, the IVA can go ahead. You’ll agree to make those monthly repayments (and possibly free up some equity in your home, if you’re a homeowner), and the creditors will agree to freeze your debt, hold off on any legal action (such as trying to make you bankrupt) and write off any outstanding debt once the IVA has successfully concluded. Please note: an IVA will have a serious impact on your credit rating, potentially making it harder to borrow money for the next six years.

Who an Individual Voluntary Arrangement (IVA) is right for: people who are in debt to three or more unsecured creditors a total of around £15,000 or more and can’t afford their monthly repayments – but can afford regular smaller payments.

4th: Protected Trust Deeds. A Protected Trust Deed is similar to an Individual Voluntary Arrangement (IVA), but only available to residents of Scotland. In most cases, a Trust Deed will last for three years.

Who a Protected Trust Deed is right for: residents of Scotland who owe three or more unsecured creditors a total of around £10,000 or more and can’t afford their monthly repayments – but can afford regular smaller payments.