Is Debt Consolidation Recession-Proof?
Is a consolidation loan the ideal financial solution for me? As we are in a recession (according to the Ernst & Young ITEM Club Autumn forecast), there’s a real need for individuals with problems with debt to realise the differences between debt consolidation and the other financial solutions that are available – and understand which one could be the perfect solution to suit their needs.
First of all, it depends on future events. In a recession, it’s more than likely to be not very good news – when consumer spending drops and businesses make a loss, many companies will resort to redundancies in order to stay afloat. For anyone who thinks their company could well be making redundancies, a consolidation loan may not be a good idea.
What is the reason? One of debt consolidation’s most attractive advantages is the ability to reduce the monthly amount an individual pays in debt repayments. A debt consolidation loan has a bigger impact when the person is in a reasonably stable financial situation: when they are aware how much they’re earning and how much they’re spending each month, they can work out the number one way of paying back their debt.
So a person facing the chance of unemployment might be better off looking into a debt management plan, as opposed to a debt consolidation loan. Debt management offers a flexible approach to debt: borrowers are allowed to ask debt management experts to talk to their creditors on their behalf, asking them to consider allowing reduced monthly payments, remove charges and/or freeze interest.
IVAs take a high level of commitment and need householders to free up some of the cash in their property. Borrowers are required to commit to making fixed monthly payments for (often) six years, based on the most they are able to afford when they have taken their needed expenses into account. Even so, an Individual Voluntary Arrangement might make an important difference – for individuals whose debts have slowly got out of control, including persons facing a sudden drop in income. Of course, Individual Voluntary Arrangements do need a level of financial stability: if the individual doesn’t feel they can commit to five years of regular payments, an IVA may not be the best debt solution for them.
Debt Help Resources:
CCCS
Think Money
Freeman Jones
