SimplyFinance - Debt

What You Need to Know About Debt Settlement

2008-03-12T00:00:00Z

With more and more people charging purchases, borrowing regulations being loosened in reaction to the demand, and inflation on the rise, lending institutions have sought out ways by which borrowers can work with them towards debt settlement instead of declaring bankruptcy. This scheme, however, is generally not available on secured debts, where repossession is practiced.

Debt Settlement is one road towards debt reduction. In general, you will lower the amount of the debt you owe, with lenders often willing to take a smaller amount monthly instead of nothing at all. In most cases, you stop making monthly payments on your debt for a time, allowing you to save. Once you have saved a certain percentage of what you owe, you then negotiate a settlement schedule with your lenders. Usually, your payment will be worked out over a two or three year time frame.

Working directly with the lender is advantageous in that you do not involve a third party, who will obviously want a part of the money involved in the debt settlement. However, sometimes it is a good idea, or even mandatory, to involve a debt settlement company.

If you are in debt and over your head, you may want to consider debt settlement. There are several online debt settlement tests through which you can calculate if you qualify for debt settlement or not. Commonly asked questions are: to how many companies do you owe money, how much are you currently paying towards debts each month, what is your monthly income, what are your total monthly expenses, and how much can you comfortably pay towards debt settlement each month. As cited by Yahoo Finance, “according to David Leuthold, vice president of the Association of Settlement Companies (TASC), about 40 to 60 percent of those who approach a (debt) settlement company are considered eligible based on their debts and personal financial situation.” This means that you have too much debt to handle with your current income situation, cannot make the minimum payments, and have actually stopped payment.

If debt settlement is the route you take to avoid bankruptcy, there are a few things to consider: damage to credit, cost, collection calls, lawsuits, and tax consequences. Even so, debt resettlement is often a much better route for your credit history in the long run. Remember that debt settlement is a service for which you must pay. Sometimes you pay a percentage of the total amount owed before debt settlement, and other schemes charge you a higher percentage of the reduced amount.

Seeking Debt Advice

2008-01-08T00:00:00Z

There are many ways to get into debt and, thankfully, there are also many ways to get out of it. Whether you go it alone or enlist the help of a debt counseling agency to get some debt advice, there are different types of debt help to get you out of trouble. The most common solutions to debt given by debt advice professionals are listed below.

Remortgaging

If you find yourself seriously in debt and you own a home, a debt advice professional may recommend that you remortgage to release the equity in your home and to use the money from this to pay off your debts. This can be a wise option in many cases as the interest rates on mortgages are usually lower than any other kind of debt.

Getting a remortgage involves ending your current mortgage and starting a new one. This often involves changing lenders, but this can often work to your advantage as you may be able to find a better deal with a new lender. However, there are a number of factors that a debt advice professional will help you to keep in mind when exploring this option. If you are paying a fixed rate you may be liable for steep fines, or redemption charges, to cancel your current arrangement.

Also, if you are in a position to change, make sure your new deal and/or lender is flexible and that you will have freedom to remortgage in the future if you choose so. In addition, inquire whether your new lender offers any perks for new customers. Many will cover the costs of the valuation of your home and legal fees. Get the best deal you can!

When considering taking a remortgage loan to pay off your debts, be sure to seek debt advice before committing to anything. A debt advice professional will help you keep things clear and will help you weigh the pros and cons of taking a remortgage loan to repay your outstanding debts.

Consolidate Your Debts

Another option given by debt advice specialists, which offers some similar benefits to remortgaging, is to consolidate your debts into one loan. Basically, this involves tallying the sum of your debts and taking a term loan out for that amount. Again, the interest rate will most likely be much lower than your current debts. Use this money to clear your debts and then begin repaying the loan with one easy repayment each month.

However, because you are already struggling financially, banks will be reluctant to give you a loan. You will have to offer up some kind of security against the loan, such as equity on your home if you already have a mortgage.

When considering a consolidation loan, as when considering a remortgage to repay your debts, it is best to get some debt advice before proceeding with any agreements. A debt advice specialist will help you put your decision into perspective so you can see if it's really the best option for you.

Debt Counseling and DMPs

Debt counseling is an increasingly popular option given by debt advice specialists to people looking for help in getting their finances in order. These services will help you make a total of your incomings and your outgoings, calculate your disposable income and come up with a realistic monthly plan for you to pay off your debts. Debt advice specialists will also help you make a budget and keep to it. All of this usually comes in the form of a debt management plan (DMP). DMPs are recognised by many financial institutions and can be very helpful when entering into negotiations with banks. Although they may not save you a huge amount of money, these services are invaluable when it comes to organising your finances.

IVAs

An IVA is a formal, legally-binding agreement between a debtor and their creditors to settle debts within a reasonable timescale, usually five years.

IVAs are becoming increasingly popular among debtors in Britain who are struggling to keep up with repayments. They offer a very useful alternative to bankruptcy, and they are popular among creditors because they generally stand to recoup more of their money than they would if you declare bankruptcy.

With the help of an insolvency practitioner, you submit a proposal to your creditors outlining the reasons for your financial problems, how much you can repay monthly and other details. If accepted, you make monthly payments and all outstanding debts are written off at the end of the agreed term. Debtors have been known to have as much as 75 percent of debts written off using this method.

While an IVA sounds great, it's best to discuss all available options with a debt advice specialist before committing to any one plan of action to reduce your debt.

Bankruptcy

Bankruptcy is a word that strikes fear into the hearts of many, and it is often seen as a last resort. Debt advice resources will tell you to very carefully consider all other options before resorting to bankruptcy. However, a bankruptcy will free a debtor from pressures from creditors, and it will ensure all assets are divided equally among creditors.

Bankruptcy has a lot of stigma attached to it as it is publicised, and it leads to a poor credit rating for six years.

As seen above there are many types of debt advice available to you. Which one you choose should depend entirely on you circumstances and your preferences. Before entering in to a remortgage, a debt consolidation loan, a debt management programme, an IVA or bankruptcy, take some time to find reliable debt advice from a debt advice specialist. A debt advice specialist will be able to help you weigh all of your options so that you're sure you're making the best decision for your particular situation.

If you would like help making a decision about what debt solution to choose, and if you'd like help finding an agency or a debt advice professional to help you, take a moment to fill out this simple form, and a SimplyFinance representative will contact you shortly to introduce you to a debt advice specialist. This debt advice specialist will answer all of your debt questions before finding the best debt relief program for you.

CLICK HERE TO CONNECT WITH A DEBT ADVISOR TODAY!

Consumer Debt in UK to Increase

2007-11-02T07:00:00Z

Statistics show that there has been an increase in the number of home repossessions in the UK during quarter three of this year due to the increased mortgage interest rates, as well as the global credit squeeze. The number of repossessions increased 1% between July and September of this year, compared to the same time period last year, to 34,717 repossessions. Conversely, the number of repossession orders has decreased by about 1% compared to quarter three of last year because repossession claims did not result in repossession orders.

The credit squeeze is affecting banks and lenders that rely on wholesale funding, and due to this, these banks and lenders have had to become increasingly selective when choosing who to lend to. In addition, they've had to increase interest rates which is lending to the increased stress and strain being felt by borrowers because they're payments are now higher.

Analysts in the UK predict that soon mortgage debt will overcome credit card debt and personal loan debt to become the leading cause of financial strain on consumers.

Records show that many of the incidences of repossession have to do with borrowers who have less than desirable credit. As of right now, 8% of the mortgage lending market is gear toward this type of borrower. Some lenders choose to cater to applicants with subprime credit histories despite the fact that they carry a higher risk that they will default on their mortgage payments.

The Council of Mortgage Lenders projects that the number of repossessed properties will soar next year due to the number of mortgages that have been given, and are still being given, to those with subprime credit histories. The Council of Mortgage Lenders estimates that by the end of 2007, there will have been 30,000 homes repossessed, and at the end of 2008, they predict that the number of repossessed properties will reach 45,000.

Unfortunately, it doesn't appear that things will be looking up for consumers any time soon. Around two million lenders will be nearing the end of the fixed interest rate period on their loan within the next 18 months, so their payments will increase to meet the current higher interest rate. These higher monthly payments will make it more and more difficult for borrowers to stay financially afloat.

Despite the financial hardships that people are dealing with, the number of insolvencies has decreased 5% since last year. R3, the Association of Business Recovery Professionals, says that this statistic may be a bit misleading as far as how many people in the UK are actually experiencing financial difficulties. R3 posits that this number appears low because banks and creditors are pushing individuals with debt problems to seek help in the form of informal debt management programs which are not legally binding, and they may last indefinitely.

To further the problem of finding debt help, the number of IVAs being granted is on the decline. Nick O'Reilly, the VP of R3 said, "The reduction in the number of IVAs is a direct result of the banks' imposition of hurdle rates before they will accept an IVA." The number of IVAs being granted may be falling, but the number of people in debt is not. They're being forced into bankruptcy or into debt management plans. R3 predicts there will be an increase in the number of bankruptcies next year because people will have to declare bankruptcy as a last resort.

The increasing amount of credit card debt in the UK is a signifier that the insolvency rate will be increasing soon. People are using unsecured borrowing as a way out of debt right now, but what they're actually doing is burdening themselves even more. Due to problems with the subprime lending market, it will be becoming increasingly difficult to use unsecured borrowing as a way out of debt in the future.

Consumer Debt at an All Time High

2007-10-10T07:00:00Z

Consumer debt in the UK is on the rise. In fact, the total amount of consumer debt in the UK (£1.345 trillion) has now overcome the total UK GDP (£1.33 trillion). In order to cover this enormous amount of consumer debt, the government is going to have to use some of the proceeds from 2008 to cover the remaining debt.

One reason for the massive amount of debt now plaguing the UK is that for years, borrowing money has been quite cheap. The low cost of financing purchases has led to a very strong "buy now, pay later" mentality among consumers in the UK. Now, as a result, consumers are £1.345 trillion in debt. This debt is comprised of credit card debt, mortgages, and loans.

There has been significant economic growth in the UK in the last ten years, and much of that growth is due to the amount of consumer spending that has taken place. However, now consumers are paying the price. In the past ten years, there has been an average of 24,000 cases of insolvency per year. In 2006 and 2007, that number has increased to an average of around 107,000 personal insolvencies per year. Some people are in so much debt that even a little interest rate increase may be enough to put them over the edge into bankruptcy or into getting an IVA.

The problem isn't only the number people that are in debt. The bigger problem is how much debt some people are in. It's not uncommon for people to be as much as £50,000 in debt, spread over three or four credit cards. On top of that, many people have their mortgages.

New mortgage customers are much more affected by the recent increases in interest rate because many people that already have mortgages were able to lock in lower interest rates. Regardless of the interest rate on a mortgages, the amount people are paying is a very significant amount of their total income. In 1997, the average mortgage was for 12.5% of a person's annual income, but now that percentage has increased to 17.6%. It's even higher for people taking out new mortgages. They can be paying up to 18.1% of their annual income on their mortgage payments.

While all of this information may sound overwhelming, there are ways to deal with your own personal debt. For example, you can take out a consolidation loan. With a consolidation loan, you can combine all of your outstanding debts into one so you'll only be making one payment per month at a lower interest rate that you'd probably be paying on your individual high interest debts.

Another solution is to speak with a debt management agency. If you choose this route, you'll speak with a debt counselor who will assess you situation, and they will speak with your creditors to try and reduce your interest rates and lower your monthly payments. As with a consolidation loan, you'll only need to make a single monthly payment, but you'll make it to your debt management agency.

These are just two of many available options to deal with your personal debt. Take a moment to fill out a short form, and a SimplyFinance representative will contact you shortly to discuss your options for dealing with your debt.

Debt Solution Options are Decreasing

2007-10-11T07:00:00Z

When you're deep in debt, you've got a few options available to you. You can declare bankruptcy, start a debt management program, consolidate your debt, or take an IVA (Individual Voluntary Arrangement). Your individual financial circumstances will be the deciding factor on which path you should follow, but your options may soon become fewer.

Recently banks have been cutting down the number of IVAs they're willing to agree to. IVAs are becoming more and more difficult to arrange, so they're becoming unprofitable to debt solution agencies. This decrease in the availability of IVAs is bad new for those whose best option is an IVA. There are many others, however, that are being pushed into taking an IVA when there are other, better options available to them, so this shortage of IVAs is good news for them. IVAs are not cheap, and they're certainly not easy to arrange, so for many, there are far less taxing ways of dealing with their debt problems.

An IVA is an agreement that is arranged by an insolvency practitioner to help pay off your debt in a manageable way. They'll work with you and your creditors to come up with a payment plan that is agreeable to all parties involved. An IVA will not be accepted unless all of your creditors agree to it. They'll most likely agree if they're likely to recuperate the majority of the money owed to them. However, if you'd be able to pay off your debt with a different solution, such as remortgaging, they will be less likely to agree to the IVA.

An IVA should be considered if you're at least £15,000 in debt and if that debt is spread across three or more creditors. IVAs are also beneficial for those whose careers would be ruined by declaring bankruptcy. On the other hand, other options should be explored if you're enormously in debt and if you've got few assets. Each case of debt needs to be evaluated individually, so take the time to seek professional counsel before making and decision about how to proceed.

The best plan of action to begin thinking about an IVA is to make a budget to see where your money is going and how much debt you currently have. Once you've got this created and you have a good understanding of your own finances, take your budget to a professional debt solutions company. They will look at your budget, speak with you to understand the nature of your debt problem, and they'll advise you on how to proceed.

If you'd like to find a debt solution company to help you decide what to do about your debt problem, take a moment to fill out our simple form, and a SimplyFinance representative will contact you shortly to discuss your options.

Debt Management Services

2007-07-23T23:00:00Z

Are you being chased by creditors looking for your payments? Is the mental stress of being hounded by creditors increasing? If so, debt management is the solution for you.

Enrolling in a free debt management program may reduce your debts by up to 95%. Debt specialists will negotiate with your creditors to reduce your monthly payments or to decrease your monthly interest payments.

The process of debt management is meant to help you consolidate all your debts into one affordable monthly payment. Instead of paying each of your creditors each month, they will be paid off right away, and you will only make one payment to your debt management specialist. After ensuring that you have sufficient income for your living expenses, your monthly payment is decided. The amount of your payment is based upon the amount of disposable income you have remaining after paying all of your living expenses for the month.

A debt management specialist will help you by contacting your debtors and ensuring them that they will receive your payments. A debt management specialist will also be able to work with your creditors to get them to freeze or reduce your interest rates significantly. Each debt management program is customized and made especially for a specific borrower. The debt management lenders will negotiate with your creditors on your behalf, knowing your specific financial needs. Debt management programs are strictly confidential, and your lender will ensure that your privacy is maintained and that no one will be told of your arrangement.

The procedure of debt management is quite simple. Once you make a payment, your new lender will negotiate with your creditors and ask them to freeze or reduce the interest charges on your debt. When your debt management lender sends your payment to your creditors, your money will be applied to the debt itself instead of to the interest payment. This will help reduce your debt sooner by paying off your principal instead of your interest.

When you send your payment to your lender, they will apportion your money for distribution to your creditors based on how much each is owed. Your debt management lender will issue a statement showing how much each of your creditors will receive each month. This amount will remain fixed unless your circumstances change. You will receive a quarterly statement from your debt management lender detailing all the transactions on your account. In addition, you will receive a statement from each of your lenders detailing the progress being made toward paying off your outstanding debt.

Debt management advice is given to you for free by debt advisers, and it is totally confidential. None of your financial problems should be left unsolved after going through a debt management service. If the debt advisor assigned to your account is not able to solve your problem, the advisor will seek assistance in solving your problem from legal sources until your problem is resolved.

There are many advantages to using a debt management company to assist you with your debt problems. You will be given a personal account manager who will listen to your specific problems, and they will help you work them out based on your situation and your needs. Debt management companies have personal connections with many lenders, so they will often be able to negotiate the resolution of your problem without having to take the issue to court. Similarly, because of these personal connections, your debt manager will be able to negotiate with your creditors regarding your interest rates. They will work with your creditors to find a way to lower or to freeze your interest rates. Finally, as mentioned above, you will receive monthly statements from your debt management company that will help you track your progress toward financial freedom.

If you would like to learn more about debt management and possibly find a debt management solution, take a second to fill out this quick form, and a representative of SimplyFinance will contact you shortly. They will introduce you to a debt specialist that will answer all your questions before searching to find the best debt solution for you and your financial needs.

CLICK HERE FOR A DEBT MANAGEMENT ADVISOR TODAY!

Finding a Credit Card During the Credit Crunch

2008-02-15T00:00:00Z

The credit crunch that is currently plaguing the UK is going to affect more than just mortgages and loans. The affect hasn't been too strong yet, but it's believed that the credit crunch will soon be felt by the UK credit card industry as well.

Credit cards are highly prevalent in the UK. According to HoffmanBrinker.com, there are 24.5 million credit card transactions made each day in the UK adding up to £1.45 billion. In 2006 alone, 181 million credit cards were issued to Britons. That's equals roughly four credit cards for each adult in the country.

Credit cards will no doubt remain a staple spending tool for UK consumers, but with the credit crunch holding strong, some consumers may find it harder and harder to find the best credit card for their needs. In addition, it has been common practice in the past to hop from card to card in order to maintain a low interest rate. People that have made this a common practice may find it more difficult to keep doing so in the future.

There are a couple of ways to stay ahead of the credit crunch so that you'll still be able to find the right credit card deal for you. The most important thing you can do is to be aware of your credit history and to be aware of how your spending and borrowing can affect your credit score. Take advantage of offers from companies who offer free credit report viewing so that you know exactly what's on your report at all times. Knowing what's included in your credit history will make it easier for you to know which credit card offers you'll be most likely to qualify for.

Another tip to remember is that each credit card application you submit puts a dent in your credit history, so it's best to apply to as few companies as possible. This is why it's important to know the types of offers you'll be most qualified for before you start applying to different card companies.

It may also be beneficial to do some research on how to improve your credit score before you start the hunt for the best credit card offer. You may be able to find some tips on types of cards that are beneficial to your credit type and to your financial situation.

Below you will find a few tips for those who already know the general status of their credit history as well as their credit card spending and repayment habits.

If you have good credit and you have an outstanding balance on your credit card, you may want to consider transferring your balance to a card with a lower interest rate. Many credit cards offer a 0% balance transfer fee while others may charge up to 3%. This cost is minimal considering the amount of money you'll be saving in interest charges by switching to a card with a lower rate.

If you have good credit and you pay the balance on your card each month, a card company with a good loyalty or perk plan might be the best fit for you. Since you pay your balance each month, you won't be paying any interest charges, and you'll be earning points toward travel or other types of rewards, or you could be earning cash back.

If you've got adverse or bad credit, there are cards available for you as well. As with getting a mortgage or a loan with an adverse credit history, you'll have to pay a higher interest rate than you would if you had good credit, but if you manage your spending and repayments well, the interest rate should be of little or no consequence.

To find the best credit card offer for you, check out the multiple online resources available. There are credit card comparison sites that will show you the pros and cons of different cards and that will show the different companies' interest rates side by side so you are able to choose the one that suits you best. There are also credit card finder sites that allow you to enter a bit of personal information, and based off of that, they will recommend the card offers that would best suit your needs.

If you'd like help managing your current credit card debt or if you're interested in speaking with a debt specialist to find out how to improve your credit score and eliminate your debt, take a moment to fill out a short form, and SimplyFinance will match you with a debt specialist or a debt manager that will work with you to help you get where you need to be with your finances. This matching service is free, and you're under no obligation to accept the offers of our debt management or debt specialist providers.

Tips and Advice for Getting Out of Debt

2007-08-08T23:00:00Z

Debt is a part of life in modern society, and almost every adult in Britain has some form of debt to repay. However, for some consumers it becomes a serious problem when mounting debts begin to exceed income and they struggle or fail to keep up with repayments. Here are some tips and advice on how to get out of debt.

Getting out of debt is not easy and it takes positive action and good planning to do it effectively. There are a number of steps that need to be taken:

Identify and prioritise and your debts
Prepare a budget and stick to it
Deal with debt
Keep up with repayments

Identify and prioritise and your debts

You may have been putting it off for a long time, but the first step is to list all of your debts and make a note of details. How much do you owe? Who do you owe? When is payment due? The next step is to prioritise these debts. Identify the debts that need immediate attention and the ones that you simply have to pay (e.g. mortgage, utilities, debts where legal action has taken place or is pending).

If you are in arrears and/or struggling to keep up payments on any of these debts you should contact the lender immediately, by letter is best. This may be daunting, but any lender will be happy to receive communication and some may be surprisingly helpful by offering reduced repayments over a longer term or some other solution.

Dealing with these priority debts should take a lot of the pressure off. So then turn your attention to secondary debts – money that has been loaned to you without providing any security. These include bank overdraft, credit card debt and debts to family and friends.

Now that you have listed and prioritised your debts, you will need to move onto the second step – preparing a budget.

Prepare a budget

Put simply, a budget is a list of money you receive and how you intend to spend it. A good personal budget is essential for financial wellbeing and is a key tool in the prevention and cure of personal debt problems.Begin by calculating your weekly or monthly income, then work out your spending and finally calculate how much you can afford to spend on repaying your debts. The best way to do this is to draw up a budget sheet where all incomings and details are set down in detail. There are countless websites and debt counseling agencies that provide free budget sheets. From this you should get a good idea on how much money you can spend on servicing your debts. Also, explore ways on how you can reduce your outgoings by, perhaps, reducing mortgage payments, cutting down on luxury items, or shopping at the supermarket instead of the local grocery store.

Dealing with debt

In an ideal world, the difference between your income and your outgoings would be enough to cover debts and begin to pay off arrears. However, this is often not the case. In this situation, the first priority is to negotiate realistic repayment plans with your priority creditors. Write a letter explaining the reason for the arrears, stating when you can start repaying and how much per payment. When negotiating with primary creditors, do your best to leave some funds to service your secondary debts. While these are not top priority, they will soon become a problem if you fail to pay any money against them.

Keeping up repayments

If you can keep up with your repayments, you are well on your way towards getting out of debt. The top priority from here on in is keeping up repayments. Try to set up a special account where you can deposit money needed to pay off debts, and find a quick and convenient payment method, like the internet or a local post office, if you can.

Getting out of debt can be a daunting task, but it is far from impossible. Whether you decide to enlist the help of a debt counseling service or opt to go it alone, we hope the tips and advice above will help you to achieve your goal.

If you'd like to speak with someone about the best debt management option for you, whether that's a consolidation loan or a debt counseling service, take a moment to fill out our short form, and a representative of SimplyFinance will contact you to discuss your options for getting out of debt. Why wait? You could be on the road to financial freedom sooner than you may think.

CLICK HERE TO CONNECT WITH A DEBT ADVISOR TODAY!