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General Questions About Debt

Am I in debt?

You have a debt problem when “you cannot afford to repay your credit commitments as they fall due”. Which is technical speak for:

  • if you can’t pay all of your bills now or can’t see your way clear to clearing them in the next 3 years or so
  • if you feel that you’re constantly being hounded by your credit cards, bank or other people you owe money to
  • if you don’t have enough money to cover your essentials and keep up the payments on your debts
  • if you find yourself ignoring the post or the phone because you don’t want ‘bad news’

If any of this sounds familiar, you probably have a debt problem and should seek advice.

I have a serious debt problem and I don't know what to do?

First of all, don’t panic!

People often define the seriousness of their problem by the amount of debt they owe, but this is not always the case.

We always advise that you should speak to someone, such as ourselves, who can put you in touch with an impartial and professional advisor to get free advice.

Never pay for advice.

You should never need to pay for advice when finding out what your options are in sorting out your debts.

If a Debt Management Company tries to charge you for advice, decline and call someone like us, because we don’t charge for our initial advice.

Should I get a loan to pay off my debts?

Sometimes, one option that might be available to you might be to get a loan to clear some or all of your debts. It can be an affordable way to pay off your debts quickly and instead pay the loan off over a period of time with regular fixed amounts.

If you are in debt, it is especially important to take professional advice when considering taking out another loan. Always remember that when you borrow more, your debts increase. However, depending upon your credit rating, sometimes either a re-mortgage or consolidation loan (that transfers all your existing debts into one replacement loan) could be the appropriate solution if your monthly payments become unaffordable.

If another loan is not the answer, you cannot get a loan or you recognise that you need to sort out your debt problem without borrowing more, then call us on 0844 774 8412* or click here to enquire online.

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What is the Credit Crunch / Credit Crisis?

The credit crunch is a sudden reduction in the availability of cheap loans and credit which may be due to the increased perception of risk by lenders, a change in monetary conditions or even the introduction of stricter credit controls.

Where did this Credit Crisis come from?
A reduction in interest rates will stimulate more borrowing by consumers and businesses. As house prices reach a critical level where they become unaffordable, the fear of consumer inflation increases and interest rates will also be increased. This makes it more difficult for people to obtain cheap credit which in turn means that many people loose what would have been their first solution, to borrow more money.

What does this mean as a borrower?
Cheap loans and credit have been freely available in the past; this is presently not the case. Creditors are tightening their lending criteria in an effort to reduce risk and subsequent defaults on borrowing. As a result, people with poorer credit histories or low incomes are finding it harder and harder to access affordable credit that they so much rely on.

The immediate effects are felt by those people who rely on 0% interest rate balance transfers to manage their affairs and keep their monthly outgoing to a minimum. These people will find credit becoming more expensive and their monthly outgoings increasing.

The other main casualty from this credit crisis are those looking for mortgages or to re-mortgage. People are finding themselves stretched so far, that often the smallest change in circumstances means that they struggle to pay their bills. The main outcome of this is the increase in repossessions of people's homes and the potential for bankruptcy.

What can I do about it?
It is very important that you consider how you will be affected over the next few years. If you’re struggling now, how will you manage moving forward? If you are relying on credit to survive, how are you going to manage when it is no longer available or your credit is maxed out? If you think you might be affected by the credit crunch then you need to consider what action to take. There are many options available to you - the most important thing is to speak to a professional who can advise you on the best course of action.

How much can I afford to pay each month?

You need to list all your income and expenditures in a similar way as shown below.

Clearly this example is not an exhaustive list of all potential income and expenditure. In expenditure you should include all priority payments such as Utility bills your rent or mortgage payments, and any other secured lending that you may have. However you should exclude any unsecured debt repayment.

Income £ Expenditure £
Your take home pay
(including overtime)
£1300 Mortgage/rent £700
Partner's take home pay £600 Council tax £70
Other income
(benefits, maintenance etc.)
£100 Water/Gas/Oil/Electricity/Phone/Mobile £80
    Food and other household £350
    Car expenses £90
    Car finances £100
    Public transport £20
    Clothing £150
    TV license/rental/Sky £30
    Insurances (Home, life, health) £12
    Pension contributions £40
Total household income £2000 Total household expenditure £1642
Monthly Disposable Income £358    

In the above example, you could reasonably propose to pay £358 per month into your IVA to settle your unsecured debts.

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