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Refinancing

Some people, especially those with significant assets, may find that they can refinance rather than proceed with debt solutions such as an IVA.

The primary means to refinance are the use of remortgaging or a secured loan. Both involve borrowing against your property to raise money to repay the unsecured debts. Provided that enough can be raised to repay the unsecured debts and that the new repayments are affordable this can be a very effective way to deal with debts. However there are significant risks associated with securing debt upon your home and appropriate professional advice should be taken before going ahead.

Other people find that they are able to secure cheaper sources of credit than the ones that they are currently using. This might apply to someone who is struggling to repay expensive credit or store cards with very high interest rates.

In these circumstances it is worth approaching your bank to discuss whether they are prepared to make an unsecured loan that would enable you to pay off the more expensive sources of credit. Provided that the new payment is affordable, and provided that all of the expensive debts can be repaid, this option may enable some people to avoid debt solutions such as an IVA. It should be noted that a lower interest rate may actually result in you paying more eventually if the term of the loan is very long.

The aftermath of the “credit crunch” and the current restrictive lending criteria of the banks, means that refinancing is an option for few people. However it should be investigated prior to going ahead with a formal debt solution such as an IVA. In common with other debt solutions, an IVA should be considered a last resort when other more traditional options such as refinancing cannot be identified or are not viable.

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