Guide to Debt Management



General Advice

Be wary of borrowing more money.

You be offered a secured loan against your house, this is of course means you debts are in one loan, but if you fail to make a repayment your house is at risk.

There are a lot of consolidation loan offers available, be aware that this may mean borrowing more money. It does usually result in the total amount being paid off, but over a long period, freeing immediate cash but costing more in the long run.

Ignoring the problem is not a solution and can make things worse.

You can get in touch with your creditors direct and explain your situation. You can put your earnings and outgoings in writing and put to them an amount you can afford to repay each month. It may take a few attempts to find someone within your creditors organisation who can make these arrangements, so persevere.

Prioritise your debts

You could make matters worse by paying a credit card bill but not paying a mortgage payment so priorities essential debts, household bills etc.

Make a complete list if your debts, separate them into priority and non priority debts and then work out payments for the priority debts first. Work out your income and expenditure, cut down on any non-essentials this will give you a working figure with witch to workout payments to creditors.

Contact free advice services, Citizens Advice or your local council may have other facilities. The National Debtline is a free service and can be reached on 0808 808 4000.

Be aware that creditors are allowed to send reminders to you if you are in debt, they are not allowed to harass you. If you feel your being harassed or you don't think you can approach your creditors yourself, Citizens Advice Bureau or other free organisation may be able to help you. If your creditor is using a debt collector to collect money, there is Office of Fair Trading (OFT) guidance that must be followed.

Switching your loan or Credit Card.

Switching credit card or loan provider can lower your interest rate, however this may only offer short term relief and often switching cards incurs a charge increasing your debt, although you may receive interest free credit on your outstanding amount for a set number of months.

Switching your Gas, Electric or Telephone Service.

You may be surprised to find a few checks of your current bills see an every increasing amount of charges per month. In many cases it is the loyal customer that is hit hardest but the increases per year to your utility bills. You may also find that when you arranged your telephone, broadband, or mobile phone tariff your deal was suitable to your usage at that time, but now you may find that you are wasting money on the wrong tariff.

Click here for our guide to saving money by switching energy or telephone providers.

You might be over paying your Gas or Electicity supplier - when was the last time you had your Gas or Electicity meter read ? Your money may be sitting in your suppliers bank account instead of yours. Be aware though this could back fire and you may have owe money ! We rcommend keeping meter readings up to date to ensure your money is not making interest in someone elses account.

OFT guidance at www.oft.gov.uk.

Citizens Advice Bureau www.citizensadvice.org.uk.

Debt management companies

Debt management companies offer to help those in debt. They normally market themselves by offering to talk to creditors for you and consolidating your debt into one monthly repayment. Sounds good, however your DMC may only tackle the low priority debts and of course they will charge a fee or a commission.

There is no guarantee of a favourable outcome and creditors can still refuse to change payments and can still take you to court.

Debt management companies should be looked into in detail before making any decisions.

Bailiffs and debt

Bailiffs recover money that people owe their clients. A creditor must get a court order before they can instruct a bailiff to try and recover the money you owe. If you cannot repay your debt then they may be able to take your belongings and sell them at auction to pay off your debt.

You will have to pay a fee to the bailiff. This depends on the type of debt and court order authorizing recover.

Bankruptcy

Bankruptcy may be an option for you, it will take the pressure off you from your creditors and at may be possible to have your debts cleared within a year. However there are penalties including the possible loss of your home. Credit will also become difficult to obtain or more expensive.

Further reading is advisable if you are considering bankruptcy.