Category Archives: Debt

Consolidating Debt Can Help Avoid Bankruptcy

Written by in Debt
0 Comments - Be The First!

Now a days there is no need for debt to lead to bankruptcy. Over the past twenty years the legal framework for bankruptcy and managing debt problems has dramatically changed meaning that there are now more options available to people that are suffering financial difficulties.

One of the key ways to get on top of debt problems is by considering debt consolidation. This is where a borrower takes out a new loan and uses this to pay off expensive credit or store card balances, loans with high interest charges or monthly instalments.

This is particularly effective where the credit rating of the borrower is still in good shape and a new loan can be sourced with good terms. If the debt problems have already caused payments to be missed then the credit rating may have been affected meaning that the best terms may not be available to the individual.

Debt consolidation works by reducing the individual’s monthly payment into a single loan obligation compared with the aggregate amount payable on the previous loans. Although the total amount of interest paid may end up being greater, the prime driver is to reduce the monthly payment to a more affordable amount for the individual. This way, much needed cash can be freed up to make living within the available budget easier.

The number of people filing for bankruptcy has increased throughout the recession but not as alarmingly as many analysts thought. This is through the increased use of debt consolidation and Individual Voluntary Arrangements (IVAs), many have managed to avoid the ultimate sanction.

IVAs have been particularly successful in reducing bankruptcy proceedings. These are legally approved debt management plans that allow debtors to talk to and agree with lenders what can be afforded. This is done with an understanding that at the end of the IVA term any remaining debt will be written off.

Whilst this is not ideal for lenders, it does offer them a structured and legally approved method of recovering some of their loan balance rather than having to repossess or go to the expense and hassle of instigating bankruptcy proceedings.

Whilst smaller amounts of debt may be manageable, larger sums may take more of an effort to get under control. Ignoring debt is never an option. Debt may eat into relationships and cause all sorts of future borrowing problems if it is left unaddressed. There is a good and effective legal framework for managing debt problems ranging from debt consolidation loans through to IVAs.

Bankruptcy need only be considered as a final and drastic remedy.

This is a post by Phil Broadhead.

0 Comments - Be The First! - Leave a comment!

Having Problems Juggling Payments?

Written by in Debt
1 Comment

As the price of household bills increases and budgets continue to be squeezed, many Brits are finding it difficult to balance their finances. Paying bills and servicing debts with several lenders can become a bit of a balancing act, particularly when your payment dates are spread throughout the month. This can make stretching the monthly salary even more difficult and at times can lead to financial penalties when late or missed payments occur.

For those individuals who find their monthly outgoings growing steadily larger than the money they have coming in and who are struggling to remember which creditors are due to be paid on which date – a debt consolidation loan may help.

Debt consolidation works by reducing the number of debts you have to service and the number of creditors you have to deal with. This can help lower the stress of juggling payments and assist you in keeping track of your money so that you don’t end up missing bills and being charged fees; it also frees up your time. Many people therefore find that servicing one debt on a monthly basis allows them to bring their finances back under control by making budgeting easier.

Debt consolidation often allows the borrower to lower their monthly payments too – although this may mean you end up paying more in the long term, it can help reduce your outgoings and give you a fixed date to work towards for becoming debt free. Most importantly, if employed correctly debt consolidation can help people manage their debts before they spiral out of control and result in more serious outcomes such as needing to contact bankruptcy lawyers.

If you are having problems juggling your debt payments and think debt consolidation may be a solution that could help, it is important you conduct research to see what options are available to you. For more information about the topic, look at Money Expert Debt Consolidation for a clearer idea of how debt consolidation works and the deals which may be available to you.

1 Comment - Leave a comment!

Danger Signs Your Borrowing is Out of Control

Written by in Credit, Debt
6 Comments

It is not a pleasant situation, but it can happen easier than most people realize. You may think you have things under control, but an emergency pops up or an unexpected situation arises, and the next thing you know you’re in financial trouble you can no longer ignore. Here are the 9 danger signs your borrowing may be out of control.

1. You have no idea where your money goes.From month to month, your paycheck comes in but you have no idea where it goes. This is a real problem, because you can’t form a plan of attack to cut back or save money unless you know where it ends up. Budget your money and keep track of all expenses.

2. You only make the minimum payments on your credit cards. This is a very expensive habit, as when you make only the minimum payment you’re paying the interest and not the principal. This expense will only grow, so if you can’t pay your balance off in full, pay as much as you can above the minimum payment.

3. Your request for a higher credit limit or a new card has been refused. Lenders will check your credit report to make sure it’s possible for you to repay them if you apply for a credit card. When the debt load is determined to be too high, any request for new or more credit is going to be shot down – a red flag for you.

4. You take out new loans to pay existing loans. This is financial quicksand and merely postponing the inevitable. The best thing to do is pay off the loans to avoid expensive interest rates.

5. You have no idea what you owe. Just because you’re not looking at it doesn’t mean it is not there. By getting a clear idea of what exactly your debt is, you have a better chance of gaining control before it becomes too much to handle.

6. You have no savings. If you’ve plundered your savings account to make payments on all credit cards or outstanding loans, it is evident things are spiraling out of control.

7. Late or missed payments. This is an indication you have too much debt on your plate and it is time to evaluate your situation to see how it can be repaired.

8. Post-dating cheques. A red flag that something is amiss, post-dating cheques is just procrastination of the inevitable and doesn’t help solve the problem.

9. Creditors are calling. You turn off your phone, change your number or let the voice mail pick up every time someone calls in fear it is another creditor. If you hear from them more than your mother, this is a sure sign your borrowing practices are out of control.

If you are experiencing any of these signs, it is an indication there are major problems with your borrowing and the sooner you take action, the better.

6 Comments - Leave a comment!

Debts First, Savings Second

Written by in Debt, Saving
10 Comments

It seems that since the credit crunch took hold and the banks curbed their enthusiasm for lending, there has been a misconception amongst financial institutions that people are now in a position to open savings accounts.

Whereas the media was once awash with adverts for loans and credit cards it now only offers insights into the best investment vehicles for our money.

This new tactic could potentially lead to people having a false impression of their financial situation and could also lead to the banks making twice the amount of money out of us.

If people are being encouraged to open savings accounts whilst still paying down debt then there is a good chance that this debt will then take longer to pay off and the banks will make more money through a prolonged payment period.

In addition, they will most likely be making money by sitting on the cash that you are putting away in savings!

And because the rates of interest charged on loans and credit cards are far higher than those paid out on savings accounts then this effectively makes saving whilst paying down debts counterproductive.

This is why you should fully take stock of your financial situation and try to pay down your debt before embarking on any savings scheme.

So if you do owe money through loans or credit cards, how do you go about paying down this debt so you can start saving?

The first thing you have to do is to work out exactly how much debt you are in, taking into account loans, credit cards and overdrafts a and then decide upon the best way to pay it off.

These calculations should include any, loans (including car insurance), credit cards and overdrafts, there is no need to factor in mortgage payments, and once you have a total you then need to work out how long it will take you to pay it back.

One of the best ways to work out how long it will take to pay your debt down is to create a personal budget that takes into account all of your income and expenditure.

To create a personal budget you need to work out exactly how much money you bring in each month and then calculate your total outgoings, including mortgage payments, utility bills, grocery bills, fuel bills and any everyday expenses such as train fares or newspapers. You also need to factor in annual expenses such as car and home insurance.

You then need to subtract you total expenditure from your income and the figure that you are left with is the amount that you should be able to pay off your debt each month.

And, once you have this figure to hand, you should then be able to calculate how long it will take to pay off your debt and work out when you can start saving.

This should also be used as an opportunity to review your spending and see where you can save money, whether through cutting back on everyday spending or switching credit cards or utility providers (comparison websites such as moneysupermarket a great resource for this), as this may enable you to pay down your debt sooner than expected.

In addition, when paying down debt it is important that you don’t add to it, so there can be no loan extensions or any more spending on credit cards.

The important thing to remember though is that saving whilst paying down debt will most likely be counterproductive, so pay down debt first and make savings second.

10 Comments - Leave a comment!
« Older Posts