Using debt management companies

There are lots of companies out there at any given time who claim to be able to get you debt free in a number years or claim to be able to help lower the interest you’re paying from month to month. Some even claim that they’re able to stop you paying interest all together! So who are these debt management companies and what debt solutions do they really offer to the average guy in the street?
Well, having researched this a fair bit over the past few weeks, it seems that there are 2 sorts of debt management companies primarily. There are those companies who target individuals who are in serious debt and are struggling to manage the payments and there are the companies who target people with several debts from several different debtors.

The latter of the companies tends to offer consolidation as their primary debt solution. Consolidating involves getting a loan (in effect) that is big enough in total to pay off all of your existing loans and credit cards with one single payment. Consolidation loans tend to be stretched over a long period of time which subsequently leads to a high amount of interest paid on the debt. The plus side though is that the month to month payments are often low enough that you can easily meet them and seldom notice them leaving your account. Companies offering this service are definitely in for the long haul.

The other type of company are the private companies that specialise in the high end debt market. In particular, IVA’s. An IVA is what people look towards who are £15,000+ in debt, own a business and don’t particularly want to declare themselves bankrupt. This is an extremely popular sector, especially with businesses owners as it gives them the opportunity to effectively write off any interest owed on all of their debts and structure the repayment of the funds themselves over a 5 year period.