Most Complete Information about Loans, Credits, Mortgages

The UK’s Growing debt Problem and Solutions Available.

Written by: Miles Grady

An estimated 3m people owe more than £10,000 on credit cards,
overdrafts and loans, according to debt solutions company One Advice
debt Solutions.

Their research found that one in 10 people who owe five figure
sums are worried about whether they will be able to repay their
debt.

A fifth of people also admitted they had months where they found
it difficult to meet their repayments, and 3% said they had
problems affording repayments most months.

In 16% of cases people said they were planning to take action to
address their financial problems, with 7% claiming they were
considering going bankrupt.

London has the highest proportion of people with large unsecured
debts, with 9% of the population owing more than £10,000,
followed by the North and Yorkshire at 8%.

People in the Midlands were least likely to have big debts, with
just 4% of the population owing more than £10,000.

debt advisors are already braced for a surge in pleas for help
when people realise the scale of their problems after Christmas.

Those worrying about their finances should seek professional
advice, as taking out the wrong debt solution could make matters
worse.

New bankruptcy Rules have come into force, which may enable
people with severe debt problems to become debt free much
quicker than previously. bankruptcy may be a better solution
than debt management, an IVA or Trust Deed.

Indeed, bankruptcy can sometimes appear to be the easy way out
for people with serious financial problems. But there are
difficulties associated with this that can remain for some time.
bankruptcy stays on your credit file for six years, which can
affect your ability to get a mortgage and credit.

An alternative to bankruptcy could be an Individual Voluntary
Arrangement (IVA) (or a Trust Deed for Scottish residents). With
these solutions you pay back an affordable amount over a fixed
period (normally 5 years for an IVA or 3 for a Trust Deed).
After this time the remainder of your debt is written-off.
During this time no interest is charged on your accounts and all
creditor action is suspended. If you have equity in your home
you are normally expected to release this by way of are mortgage
or secured loan. These solutions may not be available if you
have too much equity (because your lenders would then quite
rightly expect you to use this to pay your debts) or if your
debts are mainly with 1 creditor (because this creditor may
choose to vote against the process). There are a number of large
companies that specialise in providing IVA advice including One
Advice, debt Free Direct, Accuma, debt Matters and W3 debt
Solutions. All IVA’s have to be administered by a Licensed
Insolvency Practitioner.

Other solutions available include a debt consolidation loan or
remortgage. These can help reduce your monthly outgoings but can
lead to your overall payments over the term of the loan
increasing. You may also be converting unsecured debt to debts
secured on your home. A consolidation loan can help save money
if the interest rate on the new loan is lower than the interest
rate being charged on your existing debts (especially if these
are store cards or credit cards). Normally a good place to start
is to speak to your High Street Bank. There are also a number of
websites that will show you the cheapest loans available in the
market place i.e. moneysupermarket.com or fool.co.uk. Often the
type of loan you will be able to get is very dependent on your
recent credit history or whether you are willing to secure
against your property.

A short-term solution may be to transfer credit card balances to
other credit card providers that offer an interest free period
or cash-back. Moneysavingexpert.com provides useful tips on this
and other potential money saving ideas.

A less formal route than an IVA is a debt management plan. These
can enable you to reduce your monthly outgoings to a more
affordable level. A 3rd Party negotiates with your creditors to
accept reduced payments and where possible to accept freeze
interest/charges. debt Management plans and advice are offered
by Charities including CCCS, Citizens Advice Bureau and PayPlan
and from a number of commercial companies including Harrington Brookes, All Clear
Finance, Abacus financial Management, Baines & Ernst and
Gregory Pennington.

Your creditors may also accept a repayment proposal if you
contact them direct.

The key to solving your debt problems is not to bury your head
in the sand. Take a good look at your monthly expenditure to see
if there are any areas you can save money i.e. is £100 a month
on your mobile phone bill essential! Don’t ignore calls and
letters from your creditors and if you are unable to cope - seek
professional help. Additional advice on becoming debt free is
available at debtfree.co.uk/">debt Free.

About the author:

Director of All Clear and One Advice
IVA