When a homeowner faces the threat of repossession, finding a way to make those monthly mortgage payments jumps to the top of their priorities list. Their first port of call should really be their mortgage lender, who may let them reduce or reschedule their payments until they can get their finances under control again.



There are, however, other places they can turn to. Often, people can't pay their priority bills (such as their mortgage) because their non-priority bills (credit cards, personal loans, overdrafts, etc.) simply take up too much of their monthly income. In cases like this, they may have a wide range of debt solutions available to them, from debt consolidation to IVAs (Individual Voluntary Arrangements).

Helping them reorganise their non-priority payments, these debt solutions can free up the money they need for their mortgage payments. Different debt solutions are right for different people, so they should start by seeking debt advice from a professional debt specialist, who can help them decide which debt solution (if any) is right for them.

Debt consolidation

A debt consolidation loan may be a simple idea, but it can really help people with multiple debts. If they take out one new loan that's big enough to pay off all their unsecured high-interest debts, they'll have just one repayment to make per month, rather than many. This can greatly simplify their finances as well as reducing the interest they're paying on their debt.

A debt consolidation loan can be an effective way for someone to reduce the amount they have to pay every month, as they can arrange to repay the consolidation loan more slowly than the original debts, although this could well mean they end up paying more in total.

Depending on their situation, they might consider consolidating their debts by remortgaging - taking out a larger mortgage and using the cash to pay off their unsecured debts. Even if this increases their mortgage payments, it can still reduce their overall monthly expenditure, as they won't have to make any payments to other debts. Of course, it's always important to think carefully before securing any debt against property.

But debt consolidation isn't always the best way forward, and some people may be better off with an alternative debt solution, such as a debt management plan - or an IVA.

IVA (Individual Voluntary Arrangement)

For homeowners with significant debts (over £15,000, in most cases), an IVA could be a good way of reducing their monthly payments, freeing up cash for mortgage payments and writing off a portion of their debt. Normally lasting five years, an IVA is a legally binding agreement between an individual and their unsecured creditors:

· The individual agrees to make regular fixed payments throughout the IVA - basically, the maximum they can afford once they've taken their living expenses into account. They may also have to free up some equity in their home towards the end of the IVA, so they can pay their creditors more of what they're owed.

· If enough of the creditors accept the terms, they'll agree to write off any outstanding debt once the IVA has been successfully concluded. They also agree not to take any (further) legal action, as long as the individual keeps making the payments.

An IVA is only an option if the individual genuinely can't make their normal payments to their unsecured creditors - but can commit to making those reduced payments for the duration of the IVA.