Owing money is not a pleasant situation in which to be. In November 2015, British households borrowed £1.5 billion in loans and credit cards. For many of us, financial debt can seem like a deep hole with no obvious way out. However, there are various debt consolidation options available, some more formal and drastic than others. Have a look at this list of debt reduction techniques and find one that suits you.

Informal Agreements with Creditors

Loan companies are often prepared to talk about debt owed to them and you can come to an agreement to pay in a manageable way that's acceptable to both parties. The benefits are that this is an informal arrangement based on agreement and trust with no set-up fees. There are a range of useful templates online that you can use to draft up an agreement with your creditors.

Administration Order

This is an option if you have a County Court or High Court judgment against you which you're unable to fully pay. The debt has to be less than £5,000 and payments are made on a regular scheduled monthly basis to your local court, who handles the division of the money amongst your creditors until the debt's paid off.

Debt Payment Program

This is available in Scotland as part of the Debt Arrangement Scheme and allows you to repay debts in one affordable monthly payment. This is calculated using the money you have left over once your monthly living expenses have been paid, as opposed to the amount your creditors want you to pay.

Consolidating Your Debts

A popular option is to consolidate existing debts into a single loan, usually with a smaller monthly repayment than the combined cost of the other debts. This allows for more time to repay the debt, and it can be spread over an extended period of time. This often reduces the financial pressure on the borrower, while helping the lender avoid defaults.

Take advantage of online resources designed to help you calculate loan payments before you apply so you know if it’s worthwhile. If you can find a loan amount and a repayment period which suits your budget it’s a great way of managing debt.

Individual Voluntary Arrangement

This is managed by an Insolvency Practitioner (IP) and is an agreement with your creditors to pay part or all of your debt. You may still be able to run your business, if applicable, as an IVA gives you more control over assets than bankruptcy. You make regular payments to the IP, who divides the money between the creditors.

The amount is calculated on affordability and the term of the IVA is then set provided the creditors who hold 75% of your debt agree to this and, once in place, will stop creditors taking further action against you for your debts. However, the IP does have the power to cancel your IVA and declare you bankrupt if you don’t keep up the agreed repayments. There’s a set-up fee and a handling fee for each time you make a payment and, during your IVA, your details are put on the Individual Insolvency Register but removed 3 months after the process ends.

Bankruptcy and Debt Relief Orders

These apply to individuals only and to declare yourself bankrupt or opt for a debt relief order, you must apply to a court who'll issue an order against you, at which point you’ll receive a copy of the order and be asked to attend an interview to establish assets and debts. Any assets you have can be used to pay off debts with various restrictions to follow and your details will be added to the Individual Insolvency Register. Usually, after 12 months you’re discharged from the order and all debts are relinquished.

With the various options available, nobody in debt has an excuse not to take action. Ignoring financial difficulties just leads to unnecessary added stress, so take action to deal with any unmanageable debt you may have.