Dealing with Debt – What are Your Options?

Wading out of the quagmire of debt you have found yourself in can seem like an impossible task. However, there really is a better future ahead if you knuckle down and use some effective budgeting and cost-cutting techniques.

There are also ways that you can use finance to help your situation – which may seem odd given that you may not want to get into more debt. Read on for some great techniques to help you get back in the black.

Move debts to cheaper credit cards

If you are finding the interest payments too high on your current credit card, it is worth seeing whether you can shift this debt onto a new card with a long 0% interest on balance transfers.

Beware of minimum credit card repayments

Credit cards are great but usually only if the balance is paid in full at the end of each month. If you only ever pay the minimum monthly amount from your statement you’ll find yourself trying to pay it off for years, and it will cost you far more in interest to do so.

Take out a loan for consolidation

Standard personal loans have the benefit of being consistently cheap in terms of the amount of interest they come with – however they will tie you in to making monthly fixed payments for a fairly lengthy period, depending on the amount you take. A consolidation loan involves taking out a single loan which settles the balance on all of your other existing debts, meaning that you can just manage one payment each month.

Grants and support

You may be entitled to financial assistance if you owe large sums to utility companies for example.  Contact your provider for more information.


Although this could potentially set you back years when it comes to owning your home outright, re-mortgaging your home can help you if you need access to a larger sum of money. You just need to be sure that you want to make such a big financial commitment.

Individual Voluntary Arrangements

What is an IVA? Well, it is a legal agreement between you and your creditors, drawn up by an insolvency practitioner.  You pay reduced monthly payments over an agreed fixed term, protecting yourself from legal action and bankruptcy.

Debt management companies

DMCs negotiate with your creditors to reduce your overall payments. They are quite a quick way to get money but beware of fees – these can be quite large which will only add to your debts.

Administration orders

If you have at least two creditors and owe less than £5,000, you can make a single monthly payment to the county court, which distributes the money to your creditors, who are prohibited from making any separate demands on you.


Once declared bankrupt, you are required to hand over any assets to a ‘trustee’, who will take charge of your financial affairs and ensure your creditors are paid.  You will be subject to numerous restrictions such as finding it very difficult to get a mortgage or other loan in the future, but you will be freed from your debts after a period of time.

Debt relief orders

If you’re not a homeowner, have little income or assets and less than £15,000 of debt, a DRO may provide relief.  It lasts for a year, during which creditors are forbidden from trying to recover their money without the court’s permission.  If your situation is unchanged after 12 months, you will be discharged from your debts.

Fast-track voluntary arrangements

This is a way of cancelling bankruptcy and tackling your debts.  An application must be made through the bankruptcy court – the ‘Official Receiver’ – and your creditors must be in agreement and you must have saleable assets.

The best advice is to deal with your debts as early as possible – try never to miss payments and always let your creditors know if you’re unable to pay.  Remember that organisations like Citizens Advice Bureau offer free, independent counsel on tackling your financial problems.

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