Many people are wondering the effects that the Coronavirus (otherwise known as COVID-19) are going to affect peoples’ personal circumstances and also their debt situation, for example if you have a growing rate of unemployment, and simultaneously debts that need to be paid, then this creates a situation where peoples’ financial circumstances deteriorate, thus there is an increase in the need for debt management services and potentially debt consolidation loans.
Debt Help Solutions & The Role They Will Play In The Economy
In the United Kingdom it is possible to get what is known as universal credit, which is a type of income benefit for people who are unemployed, one such debt solution which can be made available for people on universal credit is the IVA (individual voluntary arrangement) which is a formal debt solution which lasts for (usually) a 60 month term, which enables people in debt to become debt free whilst paying less in outgoings towards their debts each month.
The IVA is a popular debt solution which many people have made use of, which has enabled them to release themselves from debt in the space of five years and write off 85% + of debt, but first before entering into an IVA it is very important to take into account the pros and cons of the scheme, which will help you to determine if the IVA is a good fit for you in your current situation.
Increase In Demand For Debt Consolidation Loans Due To The ‘Covid Effect’
Many people in response to the COVID pandemic are taking out further finance almost as a ‘personal bridging loan’ to help them in the short term financially.
Whilst this is discouraged in the current financial climate, it is noted that there has been an increase in bad credit loan applications since the initial COVID-19 lockdown at an alarming rate, and this also extends to small businesses which recently input more than 100,000 loan applications to the major banks as part of their ‘bounce back’ loans initiative.
What Are The Pros and Cons of an IVA & Can They Write Off Debt?
Pros Of An IVA:
- Lesser monthly repayments towards debts, due to a renegotiated payment scheme
- Large amounts of debt written off as part of the legislation placed as part of the insolvency act 1986 which was written into law.
- Convenient system which prevents creditors from contacting people in debt directly, giving them an appointed representative to liaise with any creditors.
- Once the scheme is completed, the remaining debt is written off and the individual in debt becomes debt free.
Cons Of An IVA:
Requires discipline and a long or medium term commitment to stay with the IVA scheme.
It is unwise to procure other forms of credit or loans whilst on an IVA.
In a nutshell, an IVA is one of the best debt solutions for people who are struggling under debt problems and as a result need serious help backed by Government legislation.
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