Paying off debt is a lot more difficult than securing a loan from a bank. When you pay off your debt, you don’t only pay the amount you borrowed but also the interest fee on top of it. It usually doubles the money for most people and the later you pay, the more money you lose.
It’s a vicious cycle that eats away at your finances while adversely affecting your life in general. However, an efficient debt plan can help save you. In this article today, we’re going to talk about individual voluntary agreement and debt consolidation, their significance, differences, and effectiveness. Here’s everything you need to know:
Individual Voluntary Agreement (IVA)
If you are sick and tired of your creditor constantly pressuring you to pay off the debt, the individual voluntary agreement is something you need to look into. Not to mention, the aggressive debt collections that only add to your anxiety. Well, the individual voluntary agreement, also known as an IVA, is the solution to all such issues.
It’s a binding agreement between you and your creditor that is signed in the presence of an attorney or a legal financial advisor. It buys you a significant amount of time to pay off your debt. Plus, your creditor won’t be able to force you to make any earlier payments or there shall be consequences.
However, you need to have a certain amount of money to make regular debt payments every month with an IVA. In case you fail to make the payment, you’ll have to bear the brunt for violating the terms and conditions of the individual voluntary agreement.
Debt Consolidation
If you’re drowning in debt and are unable to pay off the debt, debt consolidation can help you out. It’s the most beneficial debt management plan for someone who’s barely making the ends meet. A lot of people don’t afford to make regular debt payments, given their financial responsibilities and limited income.
In such a case, you can apply for a debt consolidation loan and pay off your debt in full or in two parts. A debt consolidation loan can also save you from the interest fee that accumulates in the case of late debt payments and doubles the actual amount.
Nevertheless, it has many benefits but it is hard to secure. That’s right, pals. It’s not easy securing a debt consolidation loan with a low-interest rate. You can only do that if you have a good credit score and history with the bank. A good credit score can convince the bank to make an exception for you and waive off the interest fee.
The Takeaway
Both the debt plans mentioned above are helpful when paying off your debts. However, you must consult a professional before going for either of them. I’m sure you wouldn’t want yourself in a difficult situation ever again. Make sure to research thoroughly and choose a debt plan that suits you best. I wish you all the best, my friends!