getting free, impartial advice
using a budget to calculate what they can afford to repay
selling an asset
prioritising debts in terms of the consequences
use formal debt management processes
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Benefit of changing lending products
Lower APR
Lower monthly payments
Regular Payments
Ease of one payment
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Downsides of changing lending products
You may be tied in for longer
You may not have flexibility in repayments
You may pay back more overall
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What is a guarantor?
Someone who guarantees a payment on your behalf
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What is the risk of being a guarantor?
If the borrower defaults you are liable to pay
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What is a DMC and a DMP
Debt Management Company and Debt Management Plan
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What do the the DMC do?
Create a budget and a plan of what can be paid. Contact creditors and make payments on the customer behalf
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What are the limitations of a DMP
They only deal with non priority debts such as loans
Creditors may ask for further payments
Debt will take longer to clear
Creditor does not have to accept the payment
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Who is eligible for an Administration Order?
Someone with at least one CCJ and a maximum of 5k debt
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Who sets an administration order?
County Court
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What are the benefits of an administration order?
Applicants pay one monthly amount
Court can state debt to be written off after this time if they choose
Creditors may not contact the borrower
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What are the downsides of an Administration Order?
You are limited to live on a budget set by the court
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What does it mean to be insolvent?
Your debts outweigh your assets
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What is an IVA?
Individual Voluntary Agreement
In which a person makes agreed payments to the lenders for a period of 5-6 years
It is legally binding
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What are the benefits of an IVA?
Debtors pay over a set period of time
Creditors may not add interest
Creditors may not take legal action
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What is a DRO and who does it apply to?
Debt Relief Order
Applies to those with debt under 20k
No home ownership
No assets over 1k
No expendable income over £50
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What are the benefits of a DRO?
It lasts for 12 months
Creditors can not contact you
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What are the disadvantages to a DRO?
They cost £90
They go on the public register
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What are the disadvantages of bankruptcy?
It is costly
You cannot apply for lending
You may only hold a basic bank account
It remains for 6 years
Your assets must be sold
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What are the advantages of bankruptcy?
Creditors cannot contact you
Debt can be written off in 12 months
Creditors have to stop court action
You can keep certain assets
A chance for a fresh start afterwards
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Other cards in this set
Card 2
Front
Benefit of changing lending products
Back
Lower APR
Lower monthly payments
Regular Payments
Ease of one payment
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