According to the Citizen’s Advice Bureau there is an frightening amount of us seeking their advice regarding Debt Management.
Their statistics tellus that each day England and Wales generate an additional 9,500 cases which find their way to them. The CAB also tells us there has been an upsurge of those seeking help with housing and benefit problems. On the order of eight thousand two hundred per day need advice urgently.
This data certainly reflects the UK’s economy and how it is still early days as far as things getting better.
We are coming out of a recession but notwithstanding, lots of us have to face the cold light of day. It is apparent lots of us are still struggling and not able to cope with the ever mounting pressure on our finances and household budget.
Fuel bills are mounting, but wages are not increasing sufficiently and it’s that time of year again for the council tax, rent and/or mortgages to go up.
And don’t forget we have had quite a cold winter, the coldest for some time. Those winter bills need to be paid and something tells us they will not be cheap!
The worry is, whilst there are better days ahead, we don’t fall into the temptation to borrow even more to tide us over. Credit Card Debt, remortgaging the family home or getting an extra loan from the bank are all ways that will defer those better days to come.
We may think this is the soundest way as far as having a Debt Management plan is concerned and in a few cases it can be an option. But before we plunge into extra debt we may want to weigh up the alternatives.
Credit cards are not all bad. Watch out for credit card transfers that have a 0% interest rate for a fixed time. Try to budget accordingly so you pay it off before interest is charged. This will negate the need to pour our precious funds into paying off interest and allow us to put that money to better use.
It can take lots of focus, research and budgeting but it is worth all the effort. If we calculate the gains it soon becomes obvious how we can improve our debt situation.
Take a credit card that has 19.95% APR and say we have a £1000 on it. Well that is £199.50 interest we will have to pay on top of that debt, or £16.63 per month.
Now if we were to transfer that Credit Card Debt to a card that has a 0% interest rate for six months then we save £99.95. That has to be worth taking into consideration.
An additional way we might free up disposable income is by Debt Consolidation. By reducing our monthly outgoings and not having to concern ourselves about many creditors we become more able to control our finances. Debt Consolidation also shrinks the risk of having to take on more debt.
These are a few ways we can improve our own personal situation. It is all very well the claim that things are picking up if we don’t play our part and take responsibility for our own finances.
If we do then we can benefit from coming out of the recession and not only be observers of it.
Interesting question, can prepaid cards improve our Debt Management and consequently prevent us running up added Credit Card Debt? Are they a more viable answer to credit cards? Before we react to these queries let us take a look at precisely what a prepaid card is.
Put very simply, it’s a card that you can bung any sum of cash on and use whenever you procure anything. Once you’ve used the sum allotted on the card you can not exceed it. You can put money on it by all the accustomed methods; ATM, on the internet, on the telephone or even by method of text messaging. On the other hand you can go to your neighborhood post office or bank and even a number of non finance retailers and find preloaded cards.
A prepaid card can aid us to budget well, allowing us to allocate funds for specific reasons; the weekly food allowance, or petrol for instance. Also as David Roger, managing director for the Debt Foundation charity suggests, it can help prevent us mistakenly using that overdraft once more and going in to the red.
In theory it must make it better for every single one of us out there who are just a bit too friendly with our credit cards. After all anything that diminishes the possibility of running up added Credit Card Debt has to be worth a try hasn’t it?
A further good aspect is that they are not linked back to our bank account. This means if some malicious little character steals our card and tries to fake our identity then they will not have access to all of our precious funds. Besides if they were to try and use it on the net they would not be able run up exorbitant bills.
Still before you get all excited and run out there to obtain one, there are a few things to remember. Firstly the most obvious; you can only load it with income that you already have. Would seem blatantly clear but it is very easy to forget that that piece of plastic in your hand is not an limitless reserve of credit that we can take no notice of when the statement comes through. Think of the embarrassment at the checkout if you attempt to buy something that is more than the cash available on the card! A fundamental item to keep in mind; only load it with what you can manage to pay for.
Moreover there are a number of costs incurred, monthly costs for example and quite a few even have inactivity charges.
So, yes an alternative means of Debt Management they may possibly be, but what other alternatives are there, other than not spending what we have not got? For starters we may help our finances by being stricter with ourselves. We must rein in those impulse purchases that we soon after regret, but still have got to pay for.
Having a practical budget and keeping to it goes a good distance towards preserving a healthy bank balance and reducing those worry levels.
If we are in debt up to our eyeballs then budgeting is a must. We can look at techniques such as Debt Consolidation for one, so that we do not feel so overwhelmed with it all. By placing all those debts into one pot assists us to see what we’re dealing with, not only that but Debt Consolidation will enable us to have one reduced monthly payment.
No matter what we choose the bottom line is, do not get into more debt than we can deal with.
A lot of people have overspent in November & December on Christmas presents and so may have a lack of cash flow in January.This is moreindication that many are struggling to meet the payments of their growingCredit Card Debtor other unsecured debts,and whilst trying to service these debts are leaving themselves short of money which makes them unable to keep up with their other regular household responsibilities.
It is of course not just spending over the Christmas period that leaves families struggling, we must remember that there are other factors at work here. The current economic climate has seen a considerable number of people made redundant.The self-employed market has been hit hard, principally those in trades and financial services whose incomes were mainly dependent on strong housing and mortgage markets.
Nearly all who find themselves in thissituation will struggle on with their debts for as long as possible, having sleepless nights, checking balances on a daily basis, usually more than once, holding on to the belief that things are going to get better,and in a lot of cases, without knowing it, putting their health in danger from the stress money worries can bring.
When should someone look forDebt Managementhelp. The main reasons people do not seek help,or think about Debt Consolidation,is that they feel embarrassed that they cannot pay the bills or keep up their repayments, and as above keep using the credit cardenlarging the debt,while they wait for the situation to recover. For most people it would take a huge lottery win to be in a position to pay off all this debt and get back on the road to financial recovery.
Nobody should be embarrassed to look for advice or help withDebt Management.The first step is to realise that you cannot go on in the constant fear of the next monthly bill appearing. Once a person has understoodthis they need to look forhelp to start on the road to recovery, and to regaininga little control over their finances. There is no magic wand that can be waved to make peoples Credit Card Debtdisappear, and because the credit has been borrowed,a lender isfree to expect that every effort is made to pay back as much of the debt as can be afforded.
It may be the case for a few that they have a high income and have not realisedjust how much they have actually been using their credit cards, as the intention was always to clear the balance on a monthly basis. With high interest rates, if this is not done it won’t be long before even high income earners will find themselves with as much going out as coming in.
There are manydifferent ways in which someone can try and improve the situation that they find themselves in. It may be for a few, who are lucky enough to have sufficient equity in the property they own, combined with a good income,that its worth using Credit Card Debt.This can besecured against their propertyand could provide them with enough free monthly income to get them back on their feet.
For others though this might not be an option, as it has become harder to borrow money against your home and many will not have enough income to cover the added borrowing necessary to use Debt Consolidation so a different approach to Debt Management is needed. Schemes such as Government backed IVA’s or Trust Deeds as they are known in Scotland could be used; both are legally binding agreements for both the customer and the creditor. Whichever method is used itsvery important to act right away concerning Credit Card Debt and other debt problems a long time before interest rates rise again and make it very much for all of us.
Christmas is over and the New Year has begun, so now is the time to begin looking at your financial situation and decide just what areas of your present debt needs dealingwith first. According to a report by money.co.uk 4.7 million adults admit they are still paying off last year’s Christmas costs, so debt this year looks likely to be a key issue for many people. One area of debt to reflect on what options you have is secured loans; the most common example of a secured loan that affects most of us is our mortgage. Mortgages are secured on the value of your house and so it is essential to make sure you pay your mortgage each month to avoid the risk losing your property. If you are having difficulty with your mortgage payments contact your lender or Mortgage Broker as soon as possible as often they will be able to provide help or advice, such as moving to an interest only mortgage for a shortperiod of time to help you get back on your feet financially.
Too often when taking into consideration mortgage payments we only look at how much we are going to be paying every month without taking into consideration the longer term picture. If possible making overpayments on your mortgage can reduce the whole mortgage term and thus considerably reduce the amount of interest t to be paid on the loan. Also this can create a buffer against negative equity, a situation none of us ever wants to get into. Negative equity does not just affect those who are contemplating selling their home, but also those of us who are considering taking out a Remortgage deal. If you are contemplating taking out a new Remortgage deal you will need to make sure you have a decent equity stake in your home first before contemplating this option. According to Hannah Mercedes-Skenfield at moneysupermarket.com you will need to have built up at least 20% equity in your home to find a better rate on a three year fixed deal. So what if you are not envisaging selling or do not need to take out a new Remortgage deal, is there any need to be concerned about negative equity? Well there is still the issue of property price falls. In some areas property prices have stabilised and there have even been some gains, but the recession is evidently not over and property values could still go down. If you do want to Remortgage your property and have the required amount of equity in your property to get a better rate there are still someexcellent deals to be had. Just be sure to check all the extra costs involved in remortgaging before proceeding. Some deals may look good if you just take into consideration the headline rate, some have a considerable arrangement fee, and these can differ greatly, anything from zero to one thousand pounds or even more. Other cost to consider are valuation and conveyance fees, getting guidance from a well respected Independent KW1 or Mortgage Broker is worth doing at this point to make sure it will be worth going ahead with the deal.
With a lot of talk these days about Debt Consolidation is it still wise to use credit cards when lots of people today have built up a lot of Credit Card Debt and face financial difficulties due to the latest economic climate? Well using a credit card for the right reasons is still viable, there are still a lot of good reasons why plastic is best. It is still the best way of paying for goods over the phone or on the internet, and as under section 75 of the Consumer Credit Act the cardholder is protected for all purchases over £100 (but under £30,000) if the goods or services they buy are faulty or the company goes bust, it could be also the safest as well.
So what should you search for when deciding on a new credit card deal? Well it all depends on what kind of u need, if you have a sizeable credit card balance on an costly card already then a 0% balance transfer would be best. Make sure though that you pay off as much of the debt as you can each month so that when the 0% period expires you won’t have too much of the Credit Card Debt left to clear. Another option is to look for another 0% transfer deal when your current one finishes. Remember however that most cards have a balance transfer fee of between 2.5% to 3%. If your Credit Card Debt is especially high then you could consider a card that has a low interest rate for life as many of these now have no transfer fee at all.
The one thing you should never do is use the same card for clearing debt that you use for making purchases as most credit card companies now employ a negative repayment hierarchy as part of their Debt Management process. What this means is that they will charge you three different rates: repaying balance transfers, making a new purchase and withdrawing money. If a negative repayment hierarchy is in place then your monthly repayments will be used to clear the debts with the lowest rates, which means the higher rate debts will continue to grow. To illustrate if you transfer a thousand pounds onto your card at 0% but then spend £500 with the cards APR of 16.9% all your monthly repayments will go to clearing the 0% debt first, leaving 16.9% interest to continue to be added to the total debt on the card. The best thing to do then is to have a card for transfer of existing Credit Card Debt and another card for everyday spending. In the UK currently only2 credit card companies use a positive payment hierarchy which will pay off the most expensive debt first, these are Nationwide and Saga.
But what if you are just using your card as a handy method of payment and do not intend to pay much interest as you will pay off the Credit Card Debt each month, is a credit card preferable to a standard debit card? Well there are still some benefits for using a credit card this way. To start with you will have a small amount of interest free credit until the monthly payment is made and there is the benefit mentioned previously of added security for purchases over a hundred pounds. Another benefit to search for if this is your primary reason for using a credit card is cashback or reward offers. There are many types around and the one that’s best for you will depend on what kind and what quantity of purchases you make.
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