Dealing with overwhelming debt can be a daunting task. Breaking the vicious debt cycle is most difficult when your money is quickly draining. Finding reliable solutions is significant to ensure that you don’t sink further into debt. The moment you feel like your debts are becoming unmanageable, you must get free debt advice from experienced advisors. There are several debt solutions that can help you settle your debts quickly and reduce the amount you owe. You can get in touch with Free Debt Advice London
In this blog, we examine the difference between the two most popular and significant debt solutions- IVA and DMP.
Debt Management Plan
A Debt Management Plan is a suitable solution for individuals having a small amount of debt. DMP consolidates your debts into a single monthly payment. You make the payment to your advisor, who will distribute it among your creditors. The foremost step is to reach out to an advisor who will determine the amount you owe and decide your monthly income. He will then develop a repayment plan and propose it to your creditors so that you can pay your debts in an affordable manner. You can get free debt advice to know whether a DMP is a suitable solution for you or not in London.
Eligibility criteria for a Debt Management Plan
You’ll need to fulfill the following conditions to qualify for a Debt Management Plan:
- Minimum ￡2000 unsecured debt
- Two or more creditors
- Disposable income of more than￡800-￡1000
- Must be able to make ￡100 monthly payments per month
Individual Voluntary Arrangements
An IVA is a legally binding agreement to repay your debts. With an IVA, you can get debt-free in 5 to 6 years by making affordable monthly payments towards your debts. After this period, any outstanding debt will be written off. Once you have entered into an Individual Voluntary Arrangement, your creditors cannot take legal action against you and cannot contact you for debt payments. Moreover, your interest and other charges are stopped once your creditors agree to an IVA.
Eligibility criteria for a Debt Management Plan
- Minimum ￡6000 unsecured debt
- Minimum 2 creditors
- Income of more than ￡1000
- Assets less than ￡1000
Difference between an IVA and a DMP
While IVAs and DMPs are similar to each other, there are some significant differences between the two.
- Protection from creditor harassment
With an IVA, you stay protected from creditor calls and legal action. This isn’t the case with DMPs. Your creditors can contact you for debt payments and take legal action against you.
- Interest rate & other charges
In an IVA, interest rate and other charges from creditors are frozen. In a DMP, your creditors may agree to freeze interest & charges, but it cannot be guaranteed . Although your creditors may consent to this, it cannot be assured.
- Duration
Usually, an IVA lasts for around 5 to 6 years, while a DMP lasts until you pay the amount you owe.
- Debt written off
Once you finish your IVA, outstanding debts are written off. In a DMP, you have to pay the full amount. Any outstanding debt will not be written off.
- Direct contact with lenders
In an IVA, your creditors cannot contact you directly for debt payments. They can’t demand repayment. On the other hand, the creditors can still contact you for debt payments.
- Asset protection
During an IVA, your assets stay protected. However, if you’re a homeowner, you’ll have to release equity from your property. With a DMP, your assets do not stay protected.
- Management
You need an insolvency practitioner to manage an IVA. On the other hand, you can manage your DMP on your own or through a third party.
- Setup charges
The setup fees for an IVA are more as compared to a Debt Management Plan. However, the setup charges for an IVA are paid from the monthly payments that you make towards your IVA.
Which debt solution you choose to repay your outstanding debt depends on your individual circumstances. If you’re struggling with debt and looking for ways to resolve your debt problem, you must seek free debt advice in London.
Debts Advice can connect you with the best advisors in London who will provide free and impartial advice to help you get out of debt. Contact them to find the best solution for your individual circumstances.
