Tight credit conditions, high living costs, and worries about job security may have resulted in the increase in the number of people seeking advice with regards to managing their debts.

John Fairhurst from Payplan has said that whilst some of the people that will seek advice on their debts this year will be able to be helped simply others may be people that have lost their jobs and whilst they may not have a high level of debt as such they may find themselves suddenly defaulting on a range of payments simply because of the lack of income. The agency is now setting up an arrears management service for lenders.

Mr Fairhurst also said: “We had 2500 calls last week because in the past people traditionally would have continued to find credit and refinance. They were not living beyond their means and they never missed a payment. But now the debt merry-go-round is breaking and that has to be addressed – debt isn’t all about being in arrears. In many cases, there is usually a simply resolution to arrears problems, the difficulty is engaging the people who could be in difficulty.”

Fairhurst went on to say: “The number of decent, prime borrowers who are financially at their limit is simply unknown. Many higher income households will be getting jolts this year as income dries up, and these people will not get any help from the Government schemes that are being offered.”

He added: “When we manage a case, it doesn’t break even for two years. New entrants into the debt management sector will have to charge two or three months up front, meaning people are already a few months in arrears when they begin the debt management process. There is a definite worry as more advisers move into the debt management business.”

Debt management enquiries to Payplan increase is a post from: Glitec Loans

The new regulations will provide these debt management agencies and charities with a number of new rights. They will be able to write off a portion of the client’s debt themselves in some cases, despite any objections from the creditors. In addition to this the agencies and charities will be able to enforce a repayment structure for the remainder of the debt, even if the creditors are not happy with it. At present there are often difficulties encountered when creditors disagree with repayment schedules.

There are also some other changes that have resulted from the new regulations. Where the client owes money to a utility company the company will not be able to cut off their supply whilst the client is part of the debt management plan. Also, creditors will not be able to force the client to file for bankruptcy if they are in a debt management plan and are making repayments via the plan.

An official from the Justice Ministry stated: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation.’ He also said: ‘There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’

It also said that debt companies and charities would be able ‘to write off a proportion of the debts where a debtor complies with a plan, but cannot repay the full amount in reasonable time.’

Recent news:

• Debt worries result in many consolidations
• Debt advice companies and charities get new powers
• Darling wants banks to help vulnerable families
• Debt relief orders could make bankruptcy too easy
• Is debt consolidation the answer?
• CAB reports rise in enquiries relating to mortgage arrears and debt

Some debts could be written off by debt management firms and charities is a post from: Glitec Loans

However, there is a clause in the IVA agreement with relation to homeowners. Whilst those that have entered into an IVA do not have to sell their home in order to go through this process, the clause states that in the final year of the IVA the homeowner must use any equity in the home to put towards the outstanding debt, and this could result in these consumers facing crippling interest rates. Experts state that it means the homeowner will have to take out finance against the equity in the home, and this will probably be at a far higher rate than when they originally took out their mortgage.

IVA homeowners will also face a second blow, as their poor credit profile resulting from the IVA means that they will have to pay an even higher rate of interest on the money they borrow, which could make the repayments crippling.

One industry professional stated: ‘There is a problem here. People in an IVA will be remortgaging into something significantly more expensive. Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime – that is to say as riskier borrowers who need to be charged more to compensate for that risk.’

Recent additions:

• Options That Can Help Clear Your Debts
•  Will IVAs become more transparent?
• IVA homeowners face soaring interest rates
• Wipe Out Debt Problems With A Low Rate Loan

IVA homeowners could face problems is a post from: Glitec Loans

Experts have urged those in debt to remember that burying your head in the sand is not the answer, as the situation will only get worse until you end up in court, and in the meantime your physical and mental health could suffer, not to mention your home life, your relationships, and other aspects of your life. It you are finding it increasingly difficult to keep up with your repayments then you need to address your debt problems right away so that you can find the best solution.

There are a number of options that are available, which could help you to clear your debts more effectively. Simply going through a debt counsellor to learn how to better manage your finances could help, as these counsellors are trained to provide financial and debt help. You could consider a debt management plan, where you can make one affordable monthly repayments to be distributed by your case officer to each of your creditors on a pro rata basis.

You may prefer to handle the situation yourself and contact each of your creditors with a view to coming to an informal arrangement about the amount you pay each month and over what period. By coming to an arrangement with your creditors with regards to reducing your repayment and extending your term to accommodation the reduction you could effectively ease your debt problems.

If you want to clear your existing high interest debts, ease financial management, and reduce monthly outgoings you may find that a consolidation loan will do the trick, and this will not affect your financial future or credit. You can use the loan to repay your current debts, and enjoy one lower rate loans with just one convenient repayment to make each month.

There are also other possible solutions for those looking to get help with their debts, and those in serious debt may wish to consider an

or bankruptcy, which – whilst not encouraged because of the long term effects on your future – may be the only option for some people because of the level and severity of their debts.

No matter which solution you decide to opt for, it will be a positive move in helping you to deal with and clear your debts. The worst thing that you can do is to bury your head in the sand and hope that the problem will go away, as it will simply continue to get worse, and can affect all areas of your life.

Related Articles:

• Will IVAs become more transparent?
• Is A Secured Loan The Right Choice?
• IVA homeowners face soaring interest rates [news March 2008]

Options That Can Help Clear Your Debts is a post from: Glitec Loans

An IVA is known as a softer alternative to bankruptcy, and enables borrowers to repay a set amount each month, which is then distributed between the creditors. This is paid for a fixed period, which is usually five years, and after this period any remaining balance on the debt is written off. In order to be eligible for an IVA you or your partner must be employed full time, and you must have at least £15,000 of unsecured debt. The majority of your creditors must also agree to the IVA before it can go through.

Over recent years there have been concerns that whilst many debt agencies have been pushing IVAs with their advertisements and marketing materials, consumers were not being told enough about the risks of this process. In addition, many creditors were clamping down on IVAs, rejecting many applications and forcing borrowers who were unable to repay their debts to take other courses of action. With more and more people trying to go down the IVA route after the mass influx of advertisements – which many said made the process sound like an easy way out of debt – creditors became even stricter about accepting IVAs.

However, a new IVA protocol has recently been developed, where debt agencies, creditors, and campaigner have all worked together in order to put together a protocol that could make this process more transparent, and could see a drop in rejections from creditors.

The Insolvency Service has been involved in drawing up the protocol, and one official from the service said: “The Insolvency Service has facilitated a process which has successfully produced a voluntary code for IVAs to reflect the changing needs of the market. It will provide greater transparency for creditors and debtors alike by using standard clauses and a consistent format. Today’s protocol is a significant achievement for everyone involved.”

The move has also been welcomed by the banking industry, and a spokesperson from the British Bankers’ Association said: “The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures.”

An industry professional added: ‘All this does is tighten up and simplify what’s already in place. I’m not sure we will be forwarding more people for an IVA, but this means that more people should be accepted and less will have to resort to bankruptcy.

Will IVAs become more transparent? is a post from: Glitec Loans

To get an understanding of the consequences that may arise from being unable to repay a consolidation loan, it is important to look at how the loans work and what they do. Debt consolidation loans are used by people who already have a fairly high amount of outstanding debt.

This debt will be predominantly be composed of short term, high interest borrowing such as credit cards, store cards, overdrafts and other similar types of borrowing. These types of debts are among the most expensive on the market, with interest rates currently exceeding 25-30 per cent. This is an incredibly high price to pay for any kind of debt. However, they also have advantages. They are incredibly flexible, which means you can borrow as much or as little as you like, so long as you remain within your credit limit. You can also repay this debt as and when you like. Finally, these debts are generally unsecured which means they are not attached to any of your assets such as your home.

Debt consolidation loans will be far cheaper forms of borrowing, with interest rates often as low as 5 or 6 percent. So if you have a couple of thousand in outstanding loans, a debt consolidation loan can save you hundreds every month in interest charges, and may be the only feasible way of ever repaying the debt and clearing your balance. They will also be attractive because you can reduce all your outgoings into one, convenient monthly repayment which makes managing your finances and making repayments on time a far easier job. However, debt consolidation loans do lack the flexibility of these other forms of debt such as credit card balances. You cannot vary the amount you borrow as and when you like. The loan will be a fixed loan, for example, you can borrow £5,000, over 5 years at 7%. You cannot increase this to £6000 or pay it off earlier without calling the lender and specifically arranging to do this. And then, it may not be possible, or you may have to pay extra fees to do so. Therefore, debt consolidation loans do lack some of the advantages of the more expensive, more flexible forms of debt consolidation.

There is another major disadvantage of debt consolidation loans. You may have noticed in advertisements from debt consolidation lenders that they are only available to home owners. This is because the loan will be secured over your home. What this means is that if you fail to make the repayments, the lender can directly get the amount the lent you back by calling up your home, selling it, and taking what they are owed from the proceeds. This is a very serious consequence of failing to meet your repayments and the reason why you should consider very carefully whenever you are taking out any kind of secured loan.

Generally speaking, you will only have your mortgage secured over your home, which means if you fall behind on your repayments, the mortgage lender can sell your house to get the money they are owed. However, if you secure another loan, such as a debt consolidation loan over your home, then the same procedure can be used if you fall behind on these repayments.

If you think there is any chance that you will be unable to keep up with the repayments of the debt consolidation loan, then the best advice is not to take it out. It is putting a high risk on your home, and especially if you have children or other family obligations, this is a risk that you probably cannot afford to take.

However, there is another issue to consider in this regard. While credit cards and other short term debts may not be secured over your home, this does not mean that your home is entirely safe if you fail to keep up with all your repayments. While the process is slower and less convenient for the lender, it is the case that your home will be at risk with any debts that you cannot keep up with. This is because at the end of the day, if you cannot repay them, the lenders can go through the process of taking you to court and having you declared bankrupt, which will clear you of the debts, but you will lose your home and all other assets in the meantime.

Therefore, if you think you can meet the terms of a debt consolidation loan, and it will enable you to keep up with all your payments and commitments, then, after careful consideration, you may well decide that it is still the best way to go in your circumstances.

More Information:

• Managing your debts – It is easy for debt to get out of control. Student loans, losing your job, becoming ill or any number of other unforeseen events can easily cause debts to mount up.
• Consolidating Debts with a Loan – If it seems advertisements for debt consolidation loans are everywhere, it is because consolidated loans are big business. The primary reason for people taking out personal loans over the next year will be for debt consolidation.
• Debt consolidation under OFT spotlight
• Knee Deep In Debt – US government advice on debt consolidation

What Happens if I Can’t Pay the Debt Consolidation Loan? is a post from: Glitec Loans

Debt Management Programs

A debt management program will work with you and your creditors, such as credit and store card issuers, to find a viable way for you to pay back debts that have simply grown out of hand. While you will have signed agreements to make certain payments and be subject to certain charges, creditors will often be willing to work with you if it turns out that you are unable to meet your commitments. After all, the alternative for them is to engage in costly debt collection arrangements or even make you bankrupt. These are situations they will be trying to avoid simply because they may get a bad return at the end of the process.

So negotiation may get your interest rates lowered, late payment penalties cancelled or suspended, and you loan may be extended so you have longer to pay it off. Another reason they will be willing to accept it is that they know that once consumers have entered a debt management program, they are making a commitment to avoid further debts, and work to pay off their existing ones.

When you negotiate with them you can show them your income and outgoings, and also show them the percentage of your income that will go towards paying off the debt. It will typically only amount to a percentage of the total you should be paying them but if they are willing to accept it, that’s all that matters. As long as it looks like you’re making a real effort, and their debt is likely to be repaid over a reasonable period, they should be willing to give it a chance. Being paid slowly is far better than not being repaid at all, which is what may happen if you are made bankrupt.

Another option for managing debt is to take out a consolidation loan. Usually this will only be an option if your situation has not become too bad, or if you have some security to offer the lender. It is a good way of significantly reducing your monthly outgoings while keeping up with all of your obligations. You should be careful though that if over spending has been a problem for you in the past, you do not slip back into the habit once you are back on your feet.

Managing your debts is a post from: Glitec Loans

Income Verses Expenditure

How does somebody get into debt? Few do it intentionally, but many of us find ourselves unable to pay off the loans and credit cards we have run up. Credit cards are usually the worst, because they allow us such easy access to money.

To avoid debt in the first place, always work out exactly how much you are spending each month and what you are spending it on. That includes all the cash withdrawals that you make. One thing is for sure when you first list out your expenditure you will be surprised at just how much you spend and what it goes on!

Think Twice Before Spending

Work out from your monthly income exactly how much you have got coming in. Very few people have any spare and this is why things called “savings” are also very rare. But that is what you want to aim for: to run your finances in the best way possible you want to aim to have a little to put away in a savings account each month.

Once you’ve got over the shock of how much you spend, you will need to go through the next month making another list this time write down exactly what you spend your money on as you spend it. This is a useful exercise as it will vary from the list you made when you were simply thinking about what you spend that money on.

• Saving Advice — Advice on your savings from a resource that your can trust, the UK government

Getting Familiar With Your Habits

Now that you’ve become a bit more familiar with your spending habits and you can see where you money is going you can start to work out ways to cut back on your outgoings.

If you are having trouble actually covering all your current debt repayments then a debt consolidation loan may be the answer. This will tidy up your debt repayments into one and if you take out the loan over a long enough period you should be able to substantially reduce your monthly spend on your debt each month.

Cost

Clearly a debt consolidation loan may cost you more in the long run, but this is an exercise in debt management, not saving money. If you are really struggling then you may have to talk to the companies that you owe money to and come clean about the fact that you are in trouble. You can then agree a figure with them that you can pay each month perhaps a little lower than their standard minimum repayment figure.

• Take the debt test – from the new FSA site, money laid bare

Don’t Lose Your Rag

Don’t be scared about talking to these companies, the person you will talk to won’t be overjoyed that you are having the conversation but they won’t shout at you and neither will they insult you. It is their job to speak to people that are having financial trouble and they do so everyday. It is also their job to make sure that something, no matter how small, is paid to the company they work for. Above all, don’t lose your temper out of frustration when speaking with them: that is only a sign of your despair and not helpful to anyone.

The Light and the Tunnel

There is always light at the end of the tunnel no matter how far away it might seem. If you are really unable to cope with managing your debt problem on your own then speak to one of the debt management companies that you can either find in Yellow Pages or online. They will charge you a fee, but they make all the calls to your debtors and you will at least feel that somebody is on your side.

General Loan Advice For Managing Debt is a post from: Glitec Loans