UK Citizens Seeking Debt Advice Still at All Time High
It’s little wonder that a plethora of debt management companies continue to enter the market as demand for debt help in the UK remains higher than at any time since records began. According to the Bank of England’s debt figures, total UK personal debt now stands at nearly £1.5 trillion pounds, which in numeric terms looks quite staggering: £1,457,000,000,000.
A simple way to help understand just what an enormous figure this is would be to put it like this. Imagine if you watched the second hand on your watch tick round for 1 million seconds. It would take you approximately 12 days to count to a million. A million is generally considered to be a pretty big number, right? To count to a trillion would take over thirty thousand years!
With such enormous sums owed on credit cards, loans, overdrafts, mortgages and so forth, it’s no surprise that the numbers seeking debt help is stretching the debt advice charities to the limit. The Citizens Advice Bureau is reportedly dealing with 9,562 new debt problems every day. Figures also confirm that over a thousand people every single day are actively seeking some sort of formal debt rescheduling.
The problem however with debt advice from most debt charities, is that because of the sheer numbers seeking debt help, most debtors are treated with a one size fits all system designed to get people in and out of the door as quickly as possible. Yes, they will go through all the options that a client has to solve his debt problems such as debt management, IVA, consolidation or bankruptcy. But if a client’s case can be analysed in more depth, there may be extra ways in which a debtor may be able to reduce the amount owed, or even claim compensation for mis-sold financial products.
When people make applications to take out a loan, credit card, store card or mortgage, lenders have over the years looked at ways to increase their profits from their lending and one way that has proved particularly profitable has been to offer Payment Protection Insurance.
In theory, it makes sense to insure yourself against unforeseen problems that may arise during the course of repayment such as redundancy, ill health or an accident. However, the more profits the banks made from selling PPI, the more aggressive their approach became and this has led to a high number people looking to reclaim payment protection insurance on the grounds of mis-selling.
Debtors who, when taking out their loan or credit card, were told things like “you’ve got more chance of getting the loan if you take the insurance” or “we can’t accept you for the loan unless you take the PPI” would have a valid case to reclaim ppi. Some people may even be unaware that they have a valid case for reclaiming payment protection, such as the self employed for example; as they may not be aware that many policies exclude the self employed from ever being able to make a claim from the outset!
Other areas where people in debt may want to investigate whether or not they may be entitled to reduce their outstanding balances could include unfair charges and unfair credit agreements.
By ‘charges’ we’re talking bank charges levied for things such as bounced cheques or exceeding the overdraft limit, or credit card charges applied for exceeding credit limits or missing payment deadlines. Even though the Office of Fair trading recently lost a fight against the banks in regards to unfair charges, many people are still making claims against their banks, but debtors can attempt to reclaim credit card charges if they feel they’ve been unfairly overcharged, as this is a separate issue to bank charges and was not included in the test case.
In regards to unfair credit agreement claims, successes in this area against the banks have not been widespread but it is not beyond possibility that, as with PPI, many people may have been mis-sold their loan or mortgage without ever knowing it. You can find many companies on the internet offering debt elimination programs which seek to identify mis-selling of credit contracts and then have the debt deemed unenforceable. However the jury is still out on this one and it remains to be seen whether we’ve all been treated completely fairly by the banks over the years or whether we’ve been getting ripped off to high heaven – this is one for the claims management companies’ solicitors to battle out.
April 17th, 2012 at 7:42 pm
Please do not consolidate. It is not free, they will lower your pneaymts by increasing the length of time until you are debt free, and you will take a hit on your credit score. There is a better way.A. Have a garage sale and sell anything that you no longer need or want.B.Get a temporary part time job, if you have one, get another. The holidays are coming and there will be plenty of temporary jobs available. It is better to have a no fun year or two than a no fun decade. Here is a plan that can help you. If you work the plan, the plan will work for you:1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an emergency fund category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.2.First get current on all of you debts and make no more late pneaymts. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three pneaymts towards card #3 and that one will be paid off pretty quickly. As an example:To start
ebt #1 (highest interest): minimum payment+ extra paymentDebt #2 (middle interest): minimum paymentDebt #3(lowest interest): minimum paymentDebt #1: paid offDebt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra paymentDebt #3: minimum paymentDebt #1: paid offDebt #2: paid offDebt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late pneaymts. This works no matter how many different debts you may have.4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.5a. When you have your emergency fund in place, add a category for fun to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.You can do it and it isn’t as hard as you think. Just follow the plan.
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