Why a loan won't help you

Introduction

We rarely recommend people to take out further borrowing. Many lenders and finance houses put forward the idea of loans that tend to be expensive and unsecured. This is the wrong way to solve your problems.

• If you have high borrowings now, the last thing you need is more credit.
• Re-financing or a second mortgage is financial suicide.
• Putting all of your debt on the security of your home or under a personal guarantee you risk losing everything.
• It is not worth the risk of losing your home for the sake of a debt.

Many people think that IVAs/CVAs & Debt Consolidation Loans are the same, however they are not.

It is important to clarify the main differences: 

• In an IVA, you have only one payment to make every month, your combined debt is not a new loan. The supervisor makes individual payments to each creditor at regular intervals. You still, therefore, owe each creditor.
• A debt consolidation loan "pays off" old debt and creates a new large debt. Loan companies advertise the slogan "pay off" your debts with a loan. They make it sound like you are debt-free!
• The amount of reduction in interest in an IVA is massively reduced and in many cases stopped altogether.
• A consolidation loan is one interest rate for the entire debt balance.
  Some people do not have the option of a consolidation loan..or if they do, will pay it off for a very long time because of bad credit. A person with good credit can benefit if he/she changes his/her spending behaviour along with it.
• In an IVA you not supposed to seek additional credit.
• A consolidation loan would not have such limits.
• People should think carefully before putting their homes up against a load of clothes, stereo equipment and furniture they charged on a credit card 3 years ago.

The above distinctions are very important and can at times be confusing.

Remember even if you think you know the difference between the two it is still easy to get confused.

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Sole Traders / Partnerships Debt Advice Menu

• Sole Traders and Partnerships enquiry form
• What is an IVA?
• Individual & Personal Insolvency
• Individual Insolvency Register
• The IVA procedure
• IVAs - Facts and how they work
• IVAs - Frequently asked questions
• IVAs - Estimated completion timescale
• IVAs - Documentation required
• Download IVA questionnaire form
• What about my banking options?
• What do we do?
• Reasons for business failure
• Exactly what happens next...
• Why a loan won't help
• What is bankruptcy?
• How to deal with 'bad cheques'
• What if you have equity in your property?
• Beware of informal debt consolidation
• Non-dischargeable debts
• How do you qualify for an IVA?
• Five point debt action plan
• Debts under £5000?
• Trust Deeds (Scotland only)
• Protected Trust Deeds (Scotland only)
• Bailiff guide - know your rights
• The world of credit repair - main menu

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IVA Advice Menu

• IVA (Individual Voluntary Arrangement) Overview
• The IVA procedure
• What is an IVA?
• IVA Enquiry Form
• How to start an IVA
• Who can an IVA help?
• IVA's - Facts & how they work
• Benefits and Advantages of an IVA
• Who can an IVA help?
• IVA - Help and information
• How an IVA works
• IVA's - Frequently asked questions
• IVA - Estimated timescale
• The IVA approval process
• The IVA criteria
• Bankruptcy or IVA
• IVA - What are the costs involved?
• IVA - The documentation required
• IVA - Download forms
• Sample IVA proposals for PAYE worker
• IVA - Guide to creditors Fees
• IVA - Standard Terms & Conditions
• Individual Insolvency Register