Wednesday 20th of January 2010
The new measures announced by the UK Cards Association to help people with climbing credit card debts are "too little, too late", a claim suggests, although an individual voluntary arrangement (IVA) could be of assistance to those in serious debt.
Practices of some lenders - such as repaying the smallest debt first, allowing interest on the biggest debt to accumulate - has pushed many households into the red, with thousands of pounds owed in many cases.
If credit card debts add up to more than £15,000, then getting IVA questions answered could reassure some borrowers that bankruptcy need not be declared and that their debt can be repaid.
An IVA can freeze the interest rates on a variety of credit cards, which could help those people who rely on making minimum repayments because of high annual percentage rates.
"Whilst industry guidelines or legislation can protect borrowers, it is individual borrowers who really need to take responsibility for their debts and manage their finances carefully to avoid getting into trouble," asserts Martin Bamford, personal finance writer and chartered financial planner at Informed Choice.
Repaying debt through an IVA could pull households out of trouble and highlight responsible money management, rather than relying on credit whenever times get tough.
By Kim Parsons
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- New figures: Bankruptcy on the rise among women
