Almost everyone seems to promise free debt advice but not everyone offering it is being completely honest.
The promise of free debt advice can be misleading because while the advice maybe free, the solution to get out of debt may cost.
Some debt solutions cannot avoid fees or charges because it requires someone to manage it, however others can.
It’s important to know which debt solutions can be done with no fee included and which can’t be avoided.
Free Debt Solutions
Debt Management Plan: While some organisations will charge to manage a debt management plan others will do it for free. No one should pay to setup a debt management plan while it’s possible to either do it themselves or have help for free.
Debt Arrangement Scheme: While it’s only available to people living in Scotland a debt arrangement scheme can be done for free. Although some companies will charge it can’t be avoiding by speaking to a local money adviser.
Debt Solution Fees
IVA: It’s not possible to have an IVA setup without requiring an insolvency practitioner to manage the solution for 5 years. This means fees are require to cover the cost of managing the solution. The fees should be taken from the monthly contribution and since debtors are writing off some debt they often don’t notice. It can be an issue for people who come into money and have to repay the full debt plus fees.
Protected Trust Deed: Just as with an IVA a protected trust deed requires someone to manage the debt solution and therefore fees must be paid. The only difference is the way fees are calculated but most people entering a trust deed won’t notice this.
Bankruptcy: There are many different routes into bankruptcy but each will incur a fee, although the amount may change. Standard bankruptcy can cost as much as £750 while a debt relief order will cost £90.
Sequestration: Although there are different ways to enter sequestration from bankruptcy in the rest of the UK there is always a cost. Even a LILA which is design to help people on a low income, with little assets will cost £200.
If you require free debt advice just be aware it may still cost to resolve the debt problem and enter a solution.
It’s always best to speak with a debt advice charity who will be free and find the cheapest possible routes to solve financial problems.