Sometimes it’s not clear which is the right way out of debt for you and your family. Obviously you want the most comfortable journey if two routes will get to the same place at the same time!
But you need to make choices now, without being sure what is going to happen over the next few years or how your creditors will react.
Look at some of the possible trade-offs:
- if the easy way will take 8 years and the hard way will take 3, you might prefer to grit your teeth and get it over with;
- the easy way may not work, but the hard way is more certain;
- the hard way will give you a better credit record than the easy way;
- the quick way may make it harder to get a mortgage. You really want to buy a house, but can’t see how you can ever save a deposit, so how much does this matter?
The big choices
There is no “one size fits all” solution to debts.
If you are young and single, you will have different priorities and timescales from someone with a young family or approaching retirement. So your preferred solution might not be the choice that someone else would make.
The following articles investigate some of the most common debt dilemmas:
- Long DMP or bankruptcy? Sometimes it’s better to have a difficult year now and get a completely clean start.
- IVA or bankruptcy? If you no assets to protect then bankruptcy is almost always best. If you do have assets to protect, an IVA may be better, but find out all the facts.
- IVA or DMP? IVAs have many problems, but they are time-limited if one will work for you it can be better than a very long DMP.
- DRO or IVA? This should be an easy choice – if you qualify for a DRO it is always better (cheaper, very rarely goes wrong) than an IVA. But people are being mis-sold IVAs when they would qualify for a DRO, so read up on the details and make sure you make the right choice.
- Selling your house – this may seem like the worst option, but again it could give you a clean start.
- Will a Breathing Space help? A Breathing Space can sound a lovely idea, but it doesn’t actually solve your debt problems, it just gives you 60 days to think which of the other options will work best for you. For many people there is no need for a breathing Space as it’s clear which is best so you can get going on that without a delay!
So think ahead to what could happen in the next few years: more children/children leaving home? is your job insecure or might you get promoted? are you likely to retire or inherit money? meet a new partner? Interest rates are pretty much certain to go up!
This may feel a lot like guesswork, but it’s better than just assuming your current situation will remain the same!
If you haven’t yet reclaimed PPI or may be able to get a payday loan refund, think about choosing a temporary DMP whilst you do this, as if you get a payout this may transform your options.
Are you worried that whatever you do will harm your credit rating? Don’t let credit score fears stop you from getting the debt solution that is right for you. All debt options will harm your credit rating, there is no way round this. But credit rating problems get better over time and debt problems usually get worse!
If you have questions, choose the most relevant sounding comparison linked to here and ask in the Comments section below that page.
Talk to other people, possibly debt advisors or anonymously on internet forums – see Good places to get help and advice.
If the call is very finely balanced and you keep changing your mind, in the end you have to make a decision. There is no point in delaying for months or years if nothing is changing or your situation is getting worse.