But sometimes debt is unavoidable. Sometimes there are extenuating circumstances. Or sometimes the debt is from the past, and while you are avoiding making any new debt, the debt load that you have is still there.
The worst part about debt is not the debt itself, but the amount of the payments each month can be enough to make you struggle financially. The monthly payments can make it even more likely to go into even more debt, if the amount of money you have left after paying all your loan and credit card payments each month isn't enough to cover your expenses. And while you can cut back on so many different areas, you can't really cut down on loan payments, which can be staggering. When someone is in such a difficult financial situation because of extreme debt and all their payments, they may be at a loss of how to improve their finances and their life. Sometimes even paying the minimum monthly payments are too difficult, and by only paying the minimum, the debt never gets paid off. People in such situations may think that their only choice is to declare bankruptcy, which has many negative ramifications.
The UK government came up with a solution called IVA or Individual Voluntary Agreements, which is a formal agreement made between an indebted person and their creditors. It specifically is meant for people that want to pay off their debt but can't handle the high monthly payments.
With an IVA, you're only asked to pay what you can afford, taking into account your monthly income, with allowances taken for your regular bills. This way your debt payments won't put you more into debt each month, and you can actually make headway in paying off your debt. This is an agreement made with your creditors using an IVA company, and within five years of monthly payments, your debt will be completely paid off. And there are no upfront costs.
This does affect your credit rating, but it doesn't make you lose your home, isn't publicized, your employers don't need to be told about it, etc. Once you make an IVA you will not be able to take out any more loans during this time, and if you don't pay your agreed amount, you can be made bankrupt. And there is the possibility that your creditors won't accept this IVA.
The other issue is this is something UK specific. I don't know if there are any similar things in the US, though loan consolidation can have a similar effect. I do know there are similar companies in my country that will negotiate with your creditors to lower your debt, and then make your monthly payments more affordable, so there might be something similar in countries outside the UK.
If you are struggling with large amounts of UK debt and want to be able to afford your life and not have all your debt payments each month make your life untenable financially, look up IVA Online to see if you can use it to improve your financial situation.
For those outside the UK, what I recommend is to strictly follow Dave Ramsey, build up your baby emergency fund, and then cutting back aggressively where you can so you can do the debt snowball and pay off your debts as fast as possible.
Have you ever heard of IVA? For those living outside the UK, do you know of anything similar where you live? What are they called?
See my disclaimer.