Debt doesn’t always have to be a problem, but the following five situations are ones that could mean your debts are more complicated.

1. You have more than one lender.
2. You’re not sure how much you actually owe, or when it’ll be repaid.
3. Your debt payments leave your account on different days of the month.
4. Your debt payments are more expensive than your mortgage or rent.
5. Your debt payments are just unaffordable.

There are three kinds of debt consolidation which can help you to simplify your debts – but each one if different and only suitable in certain circumstances. You can find out more if you click here.

A debt consolidation loan can address points 1, 2 and 3. You could find it simpler to consolidate all your debts into one loan, with one (cheaper) monthly payment. Just bear in mind that spreading the loan over a longer term may reduce your payments now, but could cost you more in interest overall.

If points 4 and 5 sound like your situation, debt consolidation is probably not right for you. A more suitable way to simplify your finances may be with debt management or an IVA.

A debt management plan is an informal agreement with the people you owe money – who may accept lower monthly payments and even freeze interest and charges. It’s one way of consolidating your debts into one affordable monthly payment with the help of a debt management company.

As with debt consolidation – spreading your debt repayments over a longer period may mean you pay more in interest overall (if the interest isn’t frozen) and making lower payments will be recorded on your credit file for six years.

Debt management can help people who are struggling to make their unsecured debt repayments (credit cards, personal loans, etc.). People could struggle to make those payments if the amount they owe is very high compared with what they earn, although there are all sorts of reasons why people struggle to repay their debts.

IVA (Individual Voluntary Arrangement)

An IVA is a formal and legally binding agreement between you and your unsecured lenders, which should make your monthly payments more affordable.

An IVA can make managing your debt simpler, partly because you pay an Insolvency Practitioner (IP) to deal with your lenders for you and negotiate a new agreement with them.

IVAs are also simpler as you only have to make one monthly payment. At the end of a fixed period (usually five years) any unpaid debt would be written off, assuming you’ve stuck to your side of the deal throughout.

However, an IVA is a form of insolvency and as such, would be noted on your credit file for six years – making borrowing more difficult and/or expensive. Also, on an IVA you might be asked to release equity if you own your own property, which wouldn’t happen on a debt management plan.

Simplify your debt

These debt solutions all leave you with one monthly payment to make – but each solution is different. Debt consolidation is for people who are already comfortably making their debt repayments. Debt management is for people who are struggling and can’t afford their debt repayments. An IVA is an alternative to bankruptcy and is for people with very problematic debts.

One of the main concerns of many small business owners is of course the question of cash. You need cash to make a definitive move in one direction or another, so business loans and other opportunities are going to need evaluation and careful consideration.

The web has opened up many simple options for the owner looking for extra business money. Just pop into a search engine, enter in your terms (like ‘business loans’) and see what there is to see. Be careful that you do not get too eager and enter into a deal that seems too good to be true. A good rule of thumb to protect your interests, is that if a deal does seem to be too good to be true, it usually is. Run away!

But just because there are some scuzzy offers out there does not mean that you won’t find many solid, and beneficial offers as well. it is your job as the small business owner to be able to sort, sift and narrow down these offers, separating the wheat from the chaff, as it were. The best protection you have might be your hesitation in diving in too soon to anything – do your homework, and move carefully.

You may also define debt management as the routine good & common sense practice of spending less than what you earn. But that is a definition for the layman. For all purposes, debt management stands for a structured repayment plan which has been set up but only by a designated third party. This third party has been designated either as per a court order or may be due to the affected party’s own, personal initiation.

A debt management plan will usually incorporate a line of steps. The designated third party service needs to work on these steps & take the help of the debtor too, in this regard. Firstly, a list of all creditors is compiled along with the amounts which are owed to each. Next, the debtor’s total incomes as well as expenditures are totalled. The third party designated agency now assists with the debt management plan. The debtor is helped to determine the amount of money which is available to him & which he can allocate to the debt management plan.

Think when and how you plan to use the credit card before purchasing one. For instance, if you are planning to clear the entire amount of your monthly credit card bill then it is wise to choose a card that offers a longer grace period and has no annual fee.

While purchasing expensive goods using credit cards compare the annual rate of interest with the cost of the good. You can ask the credit card company to provide you with EMI facility in such cases.

It may happen that balance of the previous month is carried over to the next month. You would have to pay an interest for the amount that is carried over to the next month. In such cases, choose a credit card that offers a lower annual interest.

If you have a few credit cards and run into financial difficulty, there are credit card consolidation companies that will pay off your cards and consolidate the loan amount. However, try not to spend too much in the first place, you should only spend what you can afford and live within your means.