The Credit Crunch: Debt management
Considering today’s economic climate, would debt management really be a good idea?
A credit crunch is a worrying time for anyone, especially for people who are in debt. In many cases, credit is more expensive and harder to obtain, partly because lenders are reluctant to take risks with their money.
In other words, the advantages of debt management may be more significant than usual. A debt management plan doesn’t involve borrowing more money (as a debt consolidation loan or mortgage would); it is about re-organising the manner in which you repay the money you owe.
What does the credit crunch mean for mortgages?
The lack of credit is not the only factor when it comes to finding a debt consolidation mortgage. A remortgage also depends on the amount of equity within an individual’s house – and on the condition of the property market. So, at a time when house prices are falling, finding a mortgage can be difficult for many people.
Although you may still be able to find lenders willing to help people consolidate their debts, many people may now look into debt management plans instead – including people who might have considered a different debt solution if their debt problems had occurred a couple of years ago, when credit was more easily available and house prices were rising.
Even so, the decision is down to the individual. They may consider taking out a debt consolidation loan rather than entering a debt management plan.
On the other hand, other people may prefer a completely different debt solution, such as an IVA (Individual Voluntary Arrangement) or a Trust Deed (available to Scottish residents only). It depends on their financial circumstances.
If you are struggling to manage your debts and would like debt advice, a debt adviser should be able to explain the pros and cons of debt management and help you decide if it’s right for you.
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