Ways to Clear Your Debt in The UK – Fact Sheet

Clear Your Debt

Debts are not always a problem if you sort them out correctly. As most people in the UK are struggling with their debts, they always seek effective ways to make all the debt payment, at the earliest. On the other hand, debts can be useful when you are willing to buy a home or a car. But, the repayment must be done within the time period mentioned. 

If you are tensed and not willing to find out the correct way of clearing the debts, then there are several effective ways that can help you out in this matter. In addition to that, you must also have a brief knowledge of the several debt payment plans which will act as a principal role in eliminating debts. 

Debts: Its Varieties

If you look closely into the matter, you will be able to know that debts are of two types — One is the problem of debts and the other is the managed debt. Let’s study them briefly. 

Problem Debt

Let’s assume that you have taken a sum of money from a creditor. Obviously, you have to pay the amount back with a certain rate of interest. Somehow, if you are not facing a comfortable situation regarding the payback process, you can consider this as a problem debt. On the other hand, in this type of debt, your creditors might opt for any type of legal actions for not paying in time. 

Managed Debt

If you are paying off all the instalments on a month-wise basis and have all the things sorted, it is generally known as the Managed Debt. In this type of debt, you don’t have to take the assistance of any debt management plan. Neither there is the need for any debt experts to provide you advice. You can manage things on your own. 

Effective Methods to Clear the Debts

Now, coming to the key points. These methods will help you in getting out of debt, as well as serve your protective measures against the creditors and maintain a stable financial situation. 

Method 1: Know your Situation

Going through the details of the financial situation is the most important step that you have to take. Make a list of all the income and expenditure for the current month. After that, obviously, you want to save money. Gather all the information regarding the credit card, store card, bank overdraft and others. Verify them and try to make a calculation. In this way, you will be able to save money and give back all the debts in time. 

Method 2: Stop extra expenditure

Just because you have debt, it doesn’t mean that you will not make a budget. Always follow this path to save money as it will take care of you in emergency situations. Stop spending unnecessary money on those types of items that you don’t need immediately. For the time, you have to forget about luxury and focus on necessity. A budget at the beginning of the month will help you do that. 

Method 3: Check your Credit Report

The credit points reflect the reputation of your credit report. That is why checking more often will give you mental satisfaction. If you see any type of disruption, then make sure to rectify it as soon as possible. For future credit transactions, the credit report of the books will play a major role. 

As per the new rules made by the GDPR, you don’t have to pay anything to check the credit report. With the help of credit reference agencies, you now have the legal rights to check the report. On the other hand, the credit score will also help you to understand how the creditors judge you. 

Method 4: Make Improvements in the Credit Score

No matter how much you check the credit score for free, maintaining it to the top-notch condition is very much important. If there is any mistake, rectify it as soon as possible. It’s better not to opt for any debt management plan which has a high chance to affect your credit score. Try to pay off the debt all by yourself. 

Method 5: Slash Down your Savings

As long as you are in debt, it’s better not to save more and delay the debt payment. Nothing will eventually happen if you save a bit less when you are in a debt. If you don’t pay the debt in time, the situation will become much more hectic, whereas saving less amount of money will never pose any threat to your daily life. 

Method 6: Stay calm and relax

Never panic while you are in a debt and try paying it off month-wise. If you do so, you might overthink and deteriorate your mental health. Just follow the correct process of debt payment and stay relaxed. After some time, you will never know when you have eliminated the debt, all by yourself. This can give you good mental satisfaction. 

Clearing the Debts with Assistance 

If you are confused, then taking the expert’s advice will be helpful for you. After you visit an organization, they might come up with certain debt payment plans that can clear all of the debts on your behalf. Without further ado, let’s check them out. 

Debt Management Plan (DMP)

A Debt Management Plan allows you to pay the debts with easy and affordable monthly payments. Just pay the agreed amount to the DMP provider and that’s all. You don’t have to face the creditors as the DMP provider will talk to the creditors on your behalf. The DMP works best for such kinds of debts that have less priority. 

The Debt Relief Order 

The Debt Relief Order, in short DRO, is only applicable if your income is lower than usual. The plan helps you by halting the repayment of the debt for 12 months. Meanwhile, you can arrange for the money, and then pay it off completely. 

Individual Voluntary Arrangement

Popularly known as the IVA, which is accepted by a large number of people in the United Kingdom. This plan also helps you in paying back the debts with the help of a fixed monthly payment. The time duration of this plan is 5 to 6 years. If you haven’t paid any additional debt, then it will be written off automatically at the end of the 5th year. In the case of missing payments due to serious issues, then the time duration might extend to a year. 

Bankruptcy 

Bankruptcy allows you a fresh start towards the repayment of the debt. It has the ability to write off all the debts that you have. Somehow, your assets will be at risk. There is more possibility of selling out those assets and paying the debts. 

Making the Full Payment

The snowball tactic will help you in making the full and final payment. Receiving an unexpected amount is generally considered a snowball payment. For instance, you have to inform the creditors about this matter with valid proofs. After that, make the full payment and you will be free from debts.