The good news is that almost every one of them can reduce their debts, but the not so good news is that it's difficult, and that it takes a long time, unless you suddenly get a large windfall.



In short you can get out of debt with a little knowledge, and a lot of resolve.

I can't supply you the determination, but I can give you first-rate guidance, and you can also locate a lot of free help on the Internet, plus there are some confirmed debt reduction systems that you can get for only a few dollars.

The first bit of advice about taking care of debts, and I can't emphasize this too much, is to take action as soon as debt becomes a problem!

Late charges, compounding interest and other fees can raise the level of debt surprisingly fast, and what was maybe a small problem can quickly become a very large one.

So what are the options?

Well, leaving aside bankruptcy, there are three other ways of reducing and getting out of debt, and they are, debt consolidation, debt management, and an IVA which is an Individual Voluntary Arrangement.

Which one would be best for you will mostly depend on the level of your debts, and if they're still relatively manageable, then a debt consolidation loan may be all that you need.

Debt Consolidation

A debt consolidation loan is essentially a new loan that pays off all, or most of your existing debts, and taking one out should result in a lower monthly payment, and a longer repayment schedule.

I said, "should result in a lower monthly payment", because the amount of your new monthly payment will depend on the repayment schedule, so make sure that your consolidation loan does in fact lower your outgoings and doesn't just simplify things.

Be aware however that the longer the repayment schedule, the more that you'll pay in interest.

I also said, "pay off all, or most of your debts", and the explanation for that is that you shouldn't consolidate all of your debts, and in most cases the only debts that you'd want to consolidate would be the high-interest ones like your credit cards, and other unsecured loans.

Debt Management

Bankruptcy is not something that any lender wants to force anybody into, so the majority of lenders will be willing to work out some kind of debt management plan if they see that the alternative is likely to mean not getting paid at all.

A debt management plan is essentially an informal understanding with your creditors that will permit you to repay your debts at a more manageable pace, and it's more often than not the best answer for those whose debts have become uncontrollable under the existing terms.

In addition to negotiating a lower monthly payment, you should insist on a lower rate of interest and also try to have previous late payment charges and other penalties deducted from your account.

Be firm when you negotiate, and you'll be surprised at what you can get, but if you're not good at negotiating then hire somebody to do it for a few bucks, because he'll most likely save you more than he costs.

Individual Voluntary Arrangement

An IVA (Individual Voluntary Arrangement) is for those whose debts have become so totally unmanageable that they see no possible way of ever being able to repay them in full. The debtor is able to avoid bankruptcy by agreeing to pay a set percentage of his or her debts to creditors, after which the outstanding debt is totally written off.

The most common scenario is that the debtor makes one monthly payment to a third party, who then distributes it amongst all the creditors.

Some creditors may insist that you give up a portion of any increase in your income that might occur during the repayment period, and this would apply to such things as a pay raise or a bonus. Additionally, if you're a homeowner and the value of your home increases during the repayment period, then you may be required to sign over a percentage of the gain shortly before the expiration of the IVA.

The normal term of an IVA is five years, and if you complete the agreement successfully then you will be legally debt-free at the end of it.