A good plan
Probably the most vital part the debt reduction process is a plan of action. This means sitting down and listing all your incomes and outgoings, it means knowing exactly how much you owe to who and it means having a good idea of your potential income over the short term at least. But more than anything a good debt reduction plan is sensible and not beyond your household’s means – because not planning sensibly will invariably lead to more debt.
Taking a new mortgage will be, if planned right, a sure way to guarantee debt reduction. Finding a lower mortgage may be difficult during this time, but if you are stuck on your Standard Variable Rate then you are pretty sure to still find a competitive rate. And with a remortgage you can get hold of some of your home’s equity as a means of debt reduction – consolidating all your debts to just leave your new mortgage.
If you cannot get hold of another mortgage or if you have just signed a new deal you can still use your home’s equity for debt management through a secured loan. Similar to a remortgage, you can take out some of the equity as a second mortgage, using that money to consolidate your debts into the one secured loan. Using secured loans as debt reduction means fewer payments, fewer interest rates to keep up with and fewer sleepless nights for you.
Individual Voluntary Arrangement
If all else fails using an IVA can be a successful form of debt reduction. Instead of just going bankrupt the borrower comes to an arrangement with the creditors to get some of the overall debt back. This can work for some, but an IVA will still leave you with multiple debts that need servicing and it will destroy your credit score for years to come. Debt reduction needs to be done as soon as you can before you have to resort to anything like an IVA.
The only way debt reduction can work is with advice. A financial adviser can look over your books, talk to you and give you a realistic option for debt reduction – because an adviser has seen everything and has a knowledge of the financial markets that will always be able to find you the best deal possible.