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Q. What is a debt consolidation loan?
A. Is a new loan at a lower interest rate than for say, credit cards, which is paid off over a longer period. The monthly payments are lower and the loan is not secured against property, so the borrower need not be a home owner.
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Q. If I have equity in my property, can this help me to pay off my debts?
A. Equity is the value of a house after mortgage and other secured debts are deducted. Releasing the equity provides a lump sum that can be used to settle debts. All debts can be consolidated into one larger debt and repayments made by one, smaller monthly amount.

There are three main ways to release this equity:

• Further borrowing from an existing mortgage
• Re-mortgage to a new mortgage with a larger borrowed sum
  
• Keep the existing mortgage and take out a new loan secured against the equity in the property

Q. What do Debt Management companies do?
A. They act as intermediaries between the debtor (owes money) and the creditors (who they owe money to). They negotiate with creditors to accept one smaller monthly payment from the debtor that is divided between the creditors.
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Q. How does an Individual Voluntary Arrangement work?
A. It is an alternative to bankruptcy. It enables the debtor (who owes money) to reach a proposed settlement with their creditors (they owe money to). When approved by the creditors, the IVA is a contract that binds all parties and prevents further action and telephone calls.

A standard IVA offers to pay an affordable monthly amount into a fund over a five year period after that the debt is cleared. Creditors accept lower repayments (often getting less than 30%). IVA repayments are based on what the individual can afford and are usually £300 to £400/ month but can be as little as £250/month, significantly less than existing repayments on cards and loans.

Q. What are the advantages of an IVA over Bankruptcy?
A. An IVA doesn’t have the stigma or disqualifications associated with bankruptcy and is a private arrangement with creditors so it doesn’t appear in the papers. There are no professional disqualifications or dis-barring from public office. IVAs are also cheaper than bankruptcy proceedings for both debtor and creditor.
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Q. Any other questions?
If you have a question which we have not answered here, please call or email us for a personal response.
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