4. Think about ways to tackle your debt - MABS Skip to main content

4. Think about ways to tackle your debt

There are 4 main ways of tackling debt depending on your circumstances. On  this page, we outline them so you can decide which may be suitable for you. Contact MABS if you have any questions.

Money management

This option may suit you if you have enough income or can get more income to pay debts by making some changes to your expenditure.  

One way of reducing or clearing debt is to raise income by selling an asset. Weigh up the benefit of selling an asset, as some assets are a vital source of economic security. For instance, you may need your car so you can get to work if you live in a rural area.  

If you can raise a lump sum, depending on how much you have, you may be able to negotiate reduced lump-sum settlements on some or all of your debts. 

Learn more about how to manage your money. 

Voluntary arrangements

A voluntary arrangement is when you contact your creditors and negotiate an agreement to pay back your debt or debts over a period of time. It does not involve going to court and it is not legally binding, unlike personal insolvency options. There are various approaches to deciding what debts to prioritise. 

The MABS approach 

The MABS approach works by making realistic and affordable repayment offers that you can stick to over time that treat all similar creditors fairly. This approach is guided by the principles of fairness and honesty.   

The stress reduction approach 

This approach works by first paying off the debt that is causing you the most stress. You pay other creditors minimum amounts (if you can afford it).

The snowball approach 

This approach focuses on paying off the smallest debt first and then working up to the bigger debts. 

The debt-stacking or avalanche approach 

This approach focuses on interest rates. You pay off the debt with the highest interest rate first. 

Formal arrangements under personal insolvency law

When you are insolvent, it means that you don’t have enough money to pay your debts by their due date and you need to make a special arrangement to deal with your debt as it’s unlikely your circumstances will change in the short term. The arrangement is approved by court and is legally binding.  

Read more on the following personal insolvency solutions: 

Further borrowing

Consolidation loan

This might suit you if you have multiple debts, but you can get credit you can afford to pay back.  

To follow the consolidation loan approach, you need to take out a new larger loan to pay or settle several debts. The new loan may be secured against your home or another property or land or you may need a guarantor.  

A consolidated loan means you now have just one debt to pay and the repayment time may be longer. 

Equity-release mortgage

The equity release option may interest you if you are over age 55 and have no mortgage. There are several types of equityrelease loans and you will need legal advice because this is a very serious undertaking. This type of mortgage makes use of the value of your home. 

You should contact MABS for free debt advice before you consider taking out a consolidation loan or equity release mortgage. These loans will not be right for everyone and you could just be putting off the inevitable and making your debt situation worse. 

Next steps 

You are now ready for Step 5 which will guide you through putting your plan into action and overcoming any obstacles you may come across along the way. 

MABS offers free advice and support 

If you get stuck along the way or just want some free and confidential advice and non-judgmental support contact MABS or read more about how MABS can help 

If you decide to contact MABS, it would be useful to have ready: 

  • Your questions  
  • Your most recent letters and emails  
  • Court documents from your creditors  
  • Any credit agreements (contracts – if you can find them)  

You can also arrange to email your Full Financial Picture for an adviser to look at before your appointment if you wish. But even if you don’t have this information, still make the call and MABS will help.

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