The Debt Advice Online Blog

For many people, 2009 will be all about just one thing – being able to make ends meet to pay bills every month. Often half these bills are loan repayments on a car and a mortgage. After this there is the payment of credit card balances; with many credit card companies charging anything from 10% to 18% on the outstanding credit card balance. Even at 10% interest, this quickly becomes a tidy sum in the way of monthly interest for those who use their credit cards frequently.

Basically, living on credit is as bad a survival strategy as can be and it leaves nothing for an emergency. To be able to cope with emergencies, and to save something for a rainy day, you should concentrate on wiping out outstanding credit card balances. To do this you firstly should consider methods of bringing down the credit accumulated on your credit cards.

One option is to go to a bank that offers a low interest bank loan. If a bank loan is available at an interest rate lower than the interest rate of any credit card debt, then availing that loan is a viable option. Should you go for this option, then remember to go for a fixed interest rate and not a floating interest rate. A floating interest rate could sometimes become higher than the interest rate on the credit card, even if it wasn’t at the time you took the loan out. Furthermore, such a bank loan should only be taken on if you are sure to discontinue ongoing use of your credit cards, and you are certain that your monthly budget allows you to repay the loan consistently. To do otherwise would be counterproductive.

Another option is to seek out a credit card companies that offers lower interest rates if transfer an outstanding balance of a previous credit card to that company. This can be an effective money saving formula if you do some homework through the internet. In this way you can reduce the interest you are paying and start making inroads on the core debt as well; queries should be done to zero in on such a company before you commit to this option.

Of course, these are solutions for those who have already accumulated credit debt. If you are thinking about getting a credit card and don’t want to fall into this trap, then think about the fact that the best way to avoid the pitfalls is by not having credit in the first place. Controlling and limiting credit card use is the first step towards lessening credit balances. Pay cash as often as you can and use a credit card only when it is unavoidable. Try to stick with one credit card only to keep track of your spending more easily. Too many credit cards can make it easier to rack up a lot of debt inadvertently. You can avoid this by sticking with one credit card which you pay in full and regularly.

To take things one step further, using a credit card continuously to tide over ‘emergencies’ is not sufficient. What you truly need is to have a budget to manage your money more effectively, instead of relying on credit. Aim to always put something aside every month; going above and beyond paying off credit debt. Those who have too much credit should first pay it off and then concentrate on not accruing more credit. Availability of credit leads people into an illusory world of financial security; thinking they have more than they in fact do. Of course, some sort of a monthly payment for a car or house might be necessary. The key is to be savvy about what you borrow and be sure these loans are realistic for your particular situation. When you opt for a loan, be realistic about the amount you can afford to spend on your car or home loan so that the monthly payments don’t strain the budget.

To truly eliminate bad credit and to be secure that you have everything you genuinely need, then budget a small provision so that you have savings being regularly made over and above paying back credit card debt and other financial commitments. If you fail to make these provisions, then you will soon slip into a financial ‘danger zone’.

With Christmas less than a month away, the shops are already in hyperdrive with 20 – 25% sales to lure you in ahead of Christmas. Pressure to buy great presents, and make it a happy time always makes it difficult to balance your budget.

Temptation is everywhere. The message seems to be to buy presents with big discounts, and if you can’t afford it, then a new credit card deal is ready to help out.

Don’t think “I just need to get through Christmas” because January is just around the corner and it is usually the cruelest month for bills.

We decided we would get together and come up with our Credit Crunch busting Christmas ideas to make a great Christmas without being burdened by greater debts .

Firstly it’s time to start thinking like your grandparents and figure out how you can spend time rather than money on your presents. Perhaps get a favourite photograph framed. Better yet, make the frame yourself. You’ll be surprised that the reaction from the recipient will usually be greater than if you waltzed into a high street and bought the most expensive thing you could afford. Maybe think about making Christmas decorations yourselves. Time to get all Blue Peter.

If you are asked for present ideas for yourself, we recommend you ask for vouchers. That way, once the dust of Christmas has settled you will be able to pick up some bargains in the January sales. As you probably know, you would only have to wait one or two days for the sales to start anyway!

If this the time you usually book your summer holiday. We recommend you hold off until nearer the time. With the travel industry desperate for customers, you’ll be sure to get some last minute bargains in 2009, and you’ll help your wallet at this expensive time of year.

Some smaller tips that will help keep costs down. Make sure you don’t leave lights on in rooms not being used, or have the heating on too high if you can help it. You could save hundreds on your next quarterly bill.

The biggest gift we recommend you give yourself this Christmas is the gift of being debt free. Whether its credit cards, loans or worse, you will be glad to get rid of that horrible feeling you get when someone mentions Credit Cards or when you hear more depressing news about the economy.

If you need to talk to someone about getting out of debt, then hop over to our advice page and find out a bit more about it.
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With the economic crisis deepening, I am probably not the only one to notice a worrying trend, that the amount people owe on their credit cards is actually increasing! According to the Bank of England’s statistics, the UK’s consumer debt has risen to record levels this autumn, having risen by £300m between August and September alone.

I don’t know about you, but I’m worried. This is a terrible trend given the Credit Crunch we are in. The one thing you don’t want to do in a time like this is to get further into debt!

I know there are many people out there who are struggling to make ends meet, and just to feed their family and pay the bills, they are living beyond their means and resorting to extra loans or credit cards to temporarily get them out of trouble. But as I’m sure you know, this will lead to an ever increasing spiral of debt. Couple that with the inevitable recession we are about to enter and it could spell disaster for many people.

So what can you do about it?

First of all you, the simplest step is to take a good look at your outgoings and see if you can cut back on items that are not essential. You’ll be surprised at what a difference that can make.

If you’ve cut back all you can and still you are falling short each month, perhaps your lender is increasing their interest rate on your existing loans or your credit card’s introductory period has expired, then you can think about consolidating your debt into one lower monthly amount. These so-called Debt Management plans are very useful to a lot of people stuck in real debt trouble.

A good debt advice service will recognise from the information you give them that you are struggling with your payments and will propose a plan whereby you only pay what you can realistically afford once your essential costs have been factored in (mortgage, utilities, food etc). Your lenders then get a copy of your financial statement to ensure that you are paying the maximum you can afford to pay once your essential living costs are factored in, and then you are able to make ends meet once more.

If you are looking for this kind of debt advice, then there’s some fantastic information on our main site under Debt Management.

That’s all for now, but in the meantime, I know times are getting tough for everyone, myself included, but try to decrease any debts you have.

Do you have to make installment payments which you can no longer afford? Are you tired of the ever increasing balance on your debts? Are you worried that your debts will never get paid off?

Well there are ways by which you could manage to pay off your debts. Unsecured loans are dished out at a very high interest, since they do not require you to put any collateral against the borrowings. The installments are high, and if you default in paying, there are penalty interests put on to the outstanding balance, and late fees added. The outstanding of your debts bloats up and up, till it becomes hopeless. Unsecured debts, especially credit card unpaid balances, attract high APRs, and it is said that credit card APRs are one of the highest in the UK, if not the highest one.

People legitimately run into financial problems, and the effect comes directly on to the monthly installments for their debts. Illness in the family is one where you would incur expenses. If you are in the UK, you are somewhat lucky. There could be many instances where you would need money to be spent immediately, and you default on your debt payments. The result is that, you land up in a financial crisis, and your debt has grown by that time, becoming totally unmanageable. You are bewildered as to how you should handle your debts, and you become overwhelmingly stressed. You need a way out.

If you are cast strapped, you might go and consult a credit counsellor. You need to have an open discussion with him, letting him know your actual financial situation. The counsellor may advice you to go for debt consolidation, and sign for a debt management plan. He can also advice you to go in for IVA, which is the short form of Individual Voluntary Arrangement. Credit card dues could be written off, though not entirely, in certain circumstances. But this involves checking on the legal aspect of the dues that you have. So, armed with so many choices, you just might manage your growing debts.

Let me explain more what I have said above.

If you are considering debt consolidation, you ought to seek advice from a credit counsellor. The counsellor’s job is to look at your financial position, take an account of your outgoings from what-ever you earn, take into consideration of other financial factors, and advise you how to go about managing your debts. If found suitable, you may be advised to visit a credit agency who deals with debt management plan (DMP). Here again you need to open your cards and have exhaustive discussions regarding your financial matters. If your case is found suitable you shall be given an option of debt consolidation.

Under DMP, your matters regarding your creditors are taken up by the credit agency. They discuss matters with your creditors and try and reduce your debts by waiving off fees, such as the late fees charged on outstanding balance, bring down the interest rate, and also try and waive off some part of the debt balance. After having done all that, they let you know, and it is wise for you to check with your creditors the facts. The agency now goes for consolidation of your debts, and you sign on a DMP with the main understanding that you shall be paying one amount per month to the agency, who would distribute that money to your debtors.

The debt against your UK credit cards could be written off. Balances of Credit cards bills, where the credit cards have been issued before April, 2007, under some legal circumstances, could actually be written off. Legally speaking, the credit card company has to have the original papers of contract when claiming dues. If the credit card company does not have the original document, the claim is not valid. It is a six year rule. If the company does not claim within this period, the so called claim becomes non-existent. The thing that you should not misunderstand is the fact that, the debt that you have does not get wiped off. It simply means that your debt remains, only it becomes un-enforceable. This ACT came under force as from 1980, when this six year rule was introduced.
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If you feel you are living your life from one pay check to the next and there never seems to be enough money to go around, you may be well advised to try credit counselling. The professionals who offer you this kind of advice can really help you arrive at a long-term, workable solution for your financial problems.

What do Credit Counselling Services Do?

First and foremost, as you might expect, given the name, credit counseling is primarily concerned with giving you advice on how to get out of debt and long-term, how to stay out of financial difficulty. You should be able to make much better spending and investment choices as a result, which should ease the financial pressure on you.
You can engage in credit counseling for any kinds of debts: credit cards, loans, medical bills and any other bills. It is a great way for many people to avoid filing for bankruptcy and also with credit counseling there is no obligation to take out any kind if a loan unless you wish to. However, the professionals involved with credit counselling will often suggest a debt consolidation loan which can cut your credit bills and pull them all into one more easily affordable monthly repayment.

Advantages of Credit Counseling

It is often possible to reduce the interest on your debts to zero, which is a significant help in enabling you to catch up with your debt repayments. Credit counselors can also get any late payment fees cancelled. This is because you will enter into an agreement with your credit counselor make planned repayments, so that the end is in sight for both you and your creditors. They will know when they will be paid and so they will b less likely to harass you for payment. In fact, one big advantage of credit counselling is that it can stop all letters and communication from your creditors so you don’t need to worry about that any longer. For many people in debt, this is a huge weight off their shoulders.

Going it Alone of Seeking Professional Help

You can opt to negotiate with your creditors yourself but this takes some guts, and you may also find that credit companies and other lenders are a lot less willing to deal with you directly than they are with a credit counsellor. Credit counsellors also have the benefits of knowing your creditors, so the chances are they will start negotiations from a position of strength, trading on their prior relationship. This is a strength not to be tossed away lightly. If you think you haven’t the confidence to successfully negotiate repayment terms you can stick to or you haven’t the discipline to honor the arrangements you will make, then you would be best advised to look for professional credit counselling help. If you decide to work for yourself in credit counseling, make sure you truly know everything there is to know about your debt situation. Keep a close eye on how much you are spending; what you are spending the money on; all of your account and credit balances and the interest rates that you are paying.

Next, stop spending anything at all on credit cards. Budget effectively, setting aside roughly half of your salary for regular expenses like the mortgage, vehicle loans, food, utility bills and food. Thirty per cent of your income you can then be spent on things you want but don’t necessarily need, like new clothes, entertainment, vacations etc. The remaining g twenty per cent each month you really should aim to save. That way, you will build up a reserve of savings you can draw upon for future expenses.
A good credit counseling agency will help you with all of this and will not charge high fees for doing so, so shop around for the right credit counseling agency for you.

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In todays financial atmosphere of lowering interest rates, one of the best places you can save yourself some money each month is by shopping for the best remortgage deal you can find. Remortgaging, or moving your mortgage from one lender to the other, is easier to do today than ever before because of the fact that the UK mortgage market is much more competitive than it ever has been in the past.

Historically here in the UK, borrowers tended to take out a mortgage to purchase a home and then never took the time to shop for a better deal elsewhere for the life of their mortgage loan. Instead, they simply paid their mortgage payment each month to the same lender and were content to do so. Some people did this because of a lack of understanding about the remortgage process, while others simply were too complacent with their current lender and not interested in spending the time to find a better mortgage deal. However, with today’s historically low interest rates, and large number of available lenders, taking the time to shop for a remortgage can save you a lot of money.

The first step in the remortgage process is to obtain what is called a “redemption statement” from your current mortgage lender. On this statement you will find the amount of money you still owe on your property. With this information in hand, in addition to proof of your identity and income, you can approach a mortgage broker or lender about a remortgage.

When you are comparing remortgage offers to one another it is vital to take into consideration any costs which you will have to pay such as legal fees and arrangements costs. Additionally, you need to look at the interest rate and the terms of repayment of the mortgage itself. It is also wise to avoid any lender who requires you to agree to a redemption charge or early redemption penalty. You should always avoid prepayment penalties whenever possible because they limit what you can do with your own money.

One of the most tempting aspects of many remortgages is the ability to pull out money from your home equity and use it to pay off higher interest credit card or other debt. While this is one advantage of a remortgage, it is also a disadvantage if not used correctly. You should always be very cautious of attaching more debt than necessary to your home. Pulling out cash with your remortgage should be done as a last resort or after careful consideration of the ultimate costs you will pay for the use of the money.

Remortgaging can be a good way to save money over the life of your mortgage loan. It is something you should do with caution and make sure you understand the terms of any mortgage you are considering. And, always make sure that you shop around for the best deal possible.

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Repossession is a noun which means act of getting back or regaining. It generally refers to a financial institution taking back an item that has been used either as a collateral or rented or leased in a transaction. In Repossession the party having the right of ownership of the property takes it back from the party having the right of possession. For instance, if a person fails to render prompt payments on a new car, the finance company which has extended the credit has the right to repossess the car. This Repossession is usually done in accordance with a credit or purchase contract which states that the seller could repossess the property purchased if purchaser fails to make due payments in a certain period of time. For prime lenders this time period is 30 days but it depends on payments that have already been made and the reason for delay.

Though the lenders don’t need a court order to repossess the property from the debtor, but it’s a norm here in UK. Through court order, lender takes back the property, pays off the amount by selling it and sends the balance to the borrower. The lender has to be very precise to obtain the true market value of the mortgage property.

Voluntary Repossession

Voluntary Repossession is done by you when you hand back the possession of the property (house) to your mortgage lender. But you must be aware of the fact that handing back the property to the lender will not absolve you of from debt. Mortgage comes to an end even if the debt is not paid in full. So you are still liable for it. So don’t try to this just to avoid to court costs because you can be caught in an inevitable disaster in the long run.

Default Repossession

These possessions are done by the lender through litigation in the court to recover the money from you by taking back the property to sell it.

Default Repossession through the letter from the Lenders

In Default Repossession you receive a letter from your lender letting you know that you have missed the payment and demanding from you to rectify the problem. You should make as much payments as you can but if you could not make it, try to reply promptly to letters you received due to non payments.

Through Court Summons

If you have received court summons, a prompt reply from your side is required if you want to avoid harmful results. The decision made by the court can be a cancellation order of the Repossession, or a delay in which this Repossession id suspended for a period of time, or it could be an agreement also. But if the Repossession is granted, date is set by the court by which you must hand back the possession of the property in question. If you don’t leave the property by the set date, you will be removed from the property.

After Repossession is done, the property will be sold either by auction or traditional estate agent to pay off the mortgage. Usually the property will go the estate agent first, if it proves a failure, then it goes to auction where the value will be massively lower.

How to stop Repossession

The lender has the legal right to achieve the best possible sale price but if the property has been undervalued, you can ask the court for an injunction to prevent the sale. It can be done before the date of the completion of Repossession.

Repossession can also be stopped by paying off the debt soon after the eviction. If your circumstances have changed and you feel that you can pay off all the debts, apply for a conjunction to stop the sale of the property.

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Debt Management is a system that takes care of your affordability regarding the monthly amount to the creditors. This is made possible through informal talks with your creditors in order to reduce your debt repayments and to reach a level where you can afford it comfortably.

Debt management is likely to be beneficial more when other traditional solutions are missing at that moment. It’s because debt management can work best only as a temporary solution to your debt crisis. Debt management does not sound good as a permanent debt solution because lenders can continue with legal actions or even bankruptcy for their payments. Though the payments are reduced, but interest continues to accrue on your accounts and in this way it will take long period to pay off the whole amount. So a good understanding is needed to select it as your debt solution.

However, if you have made up your mind to take debt management as a debt solution, you are entered into a certain set of steps leading toward Debt Management Program.

A typical DMP works in such a way that all of your unsecured debt can be consolidated into one which is more affordable in respect of monthly repayments which are going to be paid to the creditors on a pro-rata basis for an agreed period of time. This amount is decided after the deduction of normal cost from your living income.

There are Debt Management Companies that can play a role of third party to carry and explain problems from a debtor to the creditor. The Debt Management DMP explains debtor’s circumstances to creditors requesting them to stop further interest accruing on debtor’s account, any charges or legal actions to recover the debt payments.

DMP provides all details to the debtors, and being agreed by debtors a copy of this set-up made by DMP is sent to creditors. Though creditors are not obliged to agree with DMP set-up but once they re aware of the debtor’s position, they re more likely to accept it. Debtor’ failure to pay due amount over a certain period of time results in cancellation of all their agreements and paying their debts in full. By following all these steps wisely and carefully leads to you to complete Debt Management Program (DMP) and when it is completed successfully, a debtor debts free and it enable him to take a fresh financial start.

The best advice that can be given in this regard is that before choosing a Debt Management Company, always make sure that all your debt could be paid off in a certain period of five years. What you have to do is multiply your debts by 17.5 % and then divide the result by the monthly amount you can afford to pay. It will give you the answer that how much time is required to pay off your payments.

Benefits

• Through debt management you have to make only one payment per month.
• If your income reduces you can also reduce your payments to an affordable level through re-negotiation.
• You are not confronted to stress and worries normally associated with a debt.
• Rate of interest can be reduced or frozen if creditor permits
• If you are unable to pay the full amount over a certain period of time, you can ask your creditor to write off part of your debt.
• All communication on behalf of debtor to the creditor is done through Debt Management Company.

Shortcomings

• Debt management arrangements are informal so they can be cancelled by any one of creditors at any stage.
• Interest keeps on accruing against your existing debts.
• So in the end we can say that If not followed by correctly this debt management arrangement can lead you even into further debts.

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Debt consolidation loans are a favourite amongst the individuals that are in financial difficulties at the moment. The UK is heavier debt than ever before and the average individual is in over £5,000 of debt. However, this debt is often spread over several different providers and cause problems in terms of how much it is necessary to pay every month and how much interest is added on to every different balance. Debt consolidation loans can bring all of those debts under the one roof and thus make it far easier to manage your finances in terms of debt.

As the debt consolidation loan becomes more desired, the market grows with it and becomes more competitive. As a result, there are many deals and offers out there for the average consumer to take advantage of. It is imperative that you read the small print to familiarise yourself with what is on offer. However, before you take that step, take the time to learn a little bit about the debt consolidation loan in advance. There are many advantages to having a debt consolidation loan, with some of the best advantages being listed below to help you to familiarise yourself with them.

• One easy payment every month to help you to manage your finances – Instead of having several credit card and loan payments to manage every month, a debt consolidation loan will give you just one payment to manage at a fixed time of the month every month. As a result, you can manage your finances far better. If you know when the payment is due and make sure that you pay it on time every time then you will soon manage your debt without thinking about it. Not only does this make it easier to manage your finances, it also makes it easier on your general health. Managing debt can be extremely stressful and a debt consolidation loan just takes that right out of you! You can relax and get debt free at the same time.
• Fixed payments – Not only is one payment a month easily manageable, the fact that most providers actually offer you a fixed payment makes it even better. You therefore know exactly how much is coming out of your account every month and can budget accordingly. Setting up a direct debit will take it out of your hands and this, again, will make it that much easier for you!
• A lower interest rate – Debt consolidation loans have a much lower rate of interest attached to them than the various credit cards out here. It is quite easy to find loans that have less than 10% interest attached to them, but it is near on impossible doing so with a credit card. This will reduce your overall debt and will make the amount much easier to manage.
• One provider to deal with should you get into financial difficulty – If you happen to get into financial difficulty whilst dealing with several lenders then you will have a nightmare getting in touch with all of them to try and figure out a viable solution. However, if it is with just one lender then you can pick up the phone and try to come to some arrangement without much hassle. It is far less complex and far easier, especially as there is not any room for manoeuvre or game playing because another creditor is not getting a better deal.
• A fixed period in which to pay of your debt – Debt consolidation loans will run for the term of your choosing, therefore you know that it ill all be paid off after that period of time. You can thus look forward to your debt free day! This will give you a boost in more ways than one so take advantage of it!

British credit card debt is fast becoming unmanageable. As the cost of living keeps on rising and salary payments remain relatively static in comparison, a high percentage of society is beginning to struggle and is getting into debt as a result. However, the statistics are more alarming than one would think. For example, £4,554 is the figure that represents the amount of the average individual’s borrowing. This figure was compiled at the end of September 2007 and has undoubtedly risen since then. However, if it does not stop rising soon then the UK could find itself in a worse position than anticipated.

Credit card debt is particularly hard to pay off. If you have loans then you will most likely have fixed monthly payments and an end date in sight of between one and seven years. However, this is not the case with credit cards. Credit cards do not allow fixed monthly payments and there is no end date in sight. Instead, you can pay off what you want, when you want to try and reduce your debt, but that is often harder than it sounds.

The only requirement that any individual having a balance on his or her credit card has to face is making a minimum payment that is set by the creditor every month in accordance with how much the balance is. The minimum payment can be found on your credit card statements. That amount has to be forwarded to your creditor by the given date that appears alongside it. If it does not get there then you will be charged and you also risk harming your credit rating. However, it should be at the forefront of your mind that this minimum payment is just that because too many people make the mistake of only paying tee minimum off and this usually leads to seemingly permanent debt. Paying the minimum payment every month will literally mean that you are paying a grand total of £5 to £10 off a debt if you are lucky. This is not good enough when the balances reach into the thousands.

There is another disadvantage that having credit card debts has. Unfortunately the minimum payments for the various cards have to be paid off at a certain time of month, and this is usually uniform for a card so that our debt rolls around at the same time each month. However, if you have several credit card bills to pay then it can become somewhat of a nightmare. It is inevitable tat you will forget to pay at least one if you have several cards and this can cause havoc with your finances.

Credit cards may indeed be a very convenient way to borrow money, and the majority of the people that do have credit cards have the intention of paying off their balance in full every month so as not to incur interest. However, it rarely actually happens. They are extremely dangerous. The best advice that can be given is to pay off as much as you possibly can on the every month. It may also be effective to look into balance transfer cards. This may enable you to transfer all of your balances into the one place so that you have only one, or maybe even two bills to pay every month. The interest rates on regular cards can be astronomical, but balance transfer cards often offer a 0% interest deal for up to a year ad this may just give you the breathing space that you need to get your credit card debts under control and to begin to clear them once and for all!