Jan/101
What is debt management?
A debt management plan is a structured repayment plan set up by a designated third party, assisting a debtor with repayment of his or her debt. The aim of debt management is to help clear the debts at a reduced level over a fixed period of time to help the debtor make a fresh start with their finances. The client and all their debtors must agree to the arrangement and the client has to be able to meet the requirements.
Deciding to use the services of a debt management company may be hard. It can be difficult for some people to even admit that they need help and many people will wait for their financial life to spiral completely out of control before seeking assistance. Seeking the help of a debt management company early can help you get back in control and assist you towards a debt free future.
A debt management company can help the average consumer take control of their debt problems quickly. They can reduce or eliminate current levels of debt whilst helping the consumer to understand the factors that led to the debt and how to avoid these factors in the years to come. A good debt management scheme can help a consumer create a realistic budget plan to carry them forward in the future once the current debt has been eliminated. Making a monthly budget and keeping to it may well be the most essential financial decision anyone can make, but very few people will take the time to make a budget. Debt management schemes can teach this important skill and also provide their clients with expertise to remain debt free.
How does debt management work?
Firstly a debt advisor will offer advice on ways that you could save money by looking at the way you budget. They can then help you to carry out an assessment of your financial situation and debts by asking you a series of questions. By asking these questions they get a more accurate picture of your finances. It is essential that you are truly honest when they are going through your finances with you to enable the debt advisor to give you the specific help you need. This information is used to calculate how much you can comfortably afford to pay each month out of your disposable income.
Once this amount has been agreed, your creditors will then be approached and asked to cease all charges and negotiate a different repayment schedule with them, which will be easier to manage every month. In most cases creditors are happy to agree to the plans, because they know from experience, that such plans are realistic and sustainable.
You then make a single monthly payment, all of which is distributed to your creditors on your behalf. It is important that the payment is made into your debt management plan every month. Throughout the duration of your plan, you will be able to speak with an experienced debt advisor whom you should contact if you experience any problems whilst the arrangement is in place.
Your debt management plan will be reviewed at regular intervals to ensure that it still meets your circumstances. If your financial situation changes, the debt management company have the flexibility to be able to renegotiate payments on your behalf.
When it comes to reducing and eliminating current debt, a reputable debt management firm can be a very effective way to reduce debt and eliminate all the stresses it causes. While creditors are often reluctant to work directly with consumers to renegotiate the terms of their debt, they are often very willing to work with a legitimate debt management company who know the lingo of the credit card company or the bank. Speaking the same language, they will know how to negotiate the best possible terms on the repayment of a consumer’s debt. Whenever you find yourself in debt over your head, chances are a debt management service can be a big help.
Jan/100
Plans to help people solve their debt problems as quickly and fairly as possible
Debt Management Schemes are designed to assist those who are in debt and are unable to meet their commitments. In these situations finances are assessed and a monthly repayment deal is negotiated with all their creditors which all sides agree to and the debtor is able to maintain.
The consultation explores whether there would be benefits for debtors through:
- more consistent operators’ charges
- interest and other charges being frozen once a payment plan has been agreed
- the opportunity to pay off debts over time without requirements to sell homes or other assets
- protection from enforcement procedures from creditors (unless the creditor receives court permission
- better advice on the full range of options available to deal with debt problems
- changes, if introduced, to existing schemes would also be aimed at assuring creditors that they:
receive maximum returns
will not need to spend time and money on chasing debts
will have clients’ financial details regularly provided to them in a consistent format
will be confident that they are receiving the maximum possible monthly instalment.
Taking tough, swift action against firms who fail to operate within the rules and who provide sub-standard services to consumers with problem debt remains a high priority. Later this year, the Office of Fair Trading plans to launch a review of its Debt Management Guidance to obtain a clearer picture of compliance levels within the debt management sector and take appropriate follow-up action.
Other measures to help consumers and homeowners in financial difficulty include:
- Changes in eligibility criteria for Income Support Mortgage Interest for homeowners getting Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit. Where they have a mortgage, those benefits may include an additional element called Support for Mortgage Interest, which assists the homeowner with the interest on their mortgage.
- The Homeowner Mortgage Support Scheme enables eligible borrowers to reduce their monthly mortgage interest payments to affordable levels for up to two years, helping them get back on track with their finances if they suffer a temporary loss of income.
Significant funds invested to strengthen the provision of debt advice, including:
- £130 million in England and Wales between 2006 and 2011 for free face-to-face debt advice
- an additional £10 million last November to support longer opening hours at over 330 Citizens Advice Bureaux
- £5.85 million for the National Debtline to increase frontline staff levels by 50
This is in addition to the investment in legal advice available through the Legal Services Commission to help those in need in the current economic climate.
The new self-help debt advice toolkit being developed by the Money Advice Trust and funded by BIS will enable those who can to negotiate debt repayments with creditors themselves with more targeted advice agency support. This will allow debt advice agencies to prioritise their resources better and advice more clients who need in depth help.
Jan/100
Advantages of debt management plans
Advantages of debt management plans
- Allows you to bring income and expenditure back into line without taking on more borrowing;
- You can follow this option by yourself or with the help of a no fee charging debt advice agency.
Disadvantages of debt management plans
- There is no guarantee that your creditors will accept the reduced payments and/or freeze future interest payments;
- The time taken to repay your debt will increase. The time will further increase if you pay your debts through a fee-charging debt management company;
- Your credit reference file will show details of the Debt Management Plan. This will affect your ability to get credit in the future.
Debt management plans can be a good option if:
- Your financial problems are caused by a temporary reduction in income and the situation will improve in the near future.
Debt management plans can be unhelpful if:
- Your ability to pay your debts will not improve within 12 months.
Debt management plans can be disastrous if:
- The fees taken by commercial debt management companies and the refusal of banks and credit card companies to freeze interest means that your debt steadily increases.
Jan/100
Debt collectors 1st Credit restrained by OFT
Debt collection firm 1st Credit Ltd has been made by the Office of Fair Trading to clean up its act. Following an investigation by the OFT it concluded that 1st Credit “failed to meet satisfactory standards”. The OFT laid down guidelines which 1st Credit must comply, these include to;
refrain from issuing statutory demands warning of bankruptcy where it is unlikely that proceedings will be initiated;
not discuss legal action with consumers unless it is likely that such action will be taken;
ensure that sensitive cases involving vulnerable individuals, for example those with mental health or medical problems, are dealt with appropriately;
ensure that all matters of concern raised with them by the free advice sector and other third parties are dealt with appropriately.
This is a positive step for those indivuduals who feel bullied by companies such as 1st credt, who often use Statutory demands to scare debtors into paying off debts which in the long run may place them in a worse financial position.
Aug/090
More Evidence of Housing Recovery
The British Bankers’ Association have today announced that high street banks are steadily approving mortgage applications on an upward curve. For the seventh month in a row approved mortgages increased after July’s figures of 38,181 were revealed - an increase of almost 7.5% on the previous month.
Following the current trend, economists are predicting that the rate of growth will increase way into the Autumn months and possibly beyond. Despite this, the BBA point out that figures were way below the seasonal predictions and this was even more of a concern given the increased demand for mortgages.
As the credit crunch worsened during the early months of 2008, one figure stood out as a key indicator. This figure was the number of approved mortgages in July 2008. Since that time, the figure has increased by 77% percent in 12 months.
The average amount borrowed was £139,700 in July but the concerns surrounding this were eased when the group’s statistics director David Dooks commented that banks were being “more realistic” over how they lend and who they lend to.
He said the ability of potential buyers to pay a deposit and long-term sustainability were key issues when banks decided whether to offer a mortgage. Property prices would also “stall” for some time.
Aug/091
Problems Getting Credit? Remove a Default from your Credit Report
There are 3 ways in which you can repair your credit rating to achieve the ultimate result of getting that car or mortgage that you really need. These options are as follows:
1. If your default/delinquent balance is over £300 you should write to the bank in question to claim that you did not receive a notice letter of the bank’s intention to serve you with a default. It helps if you have actually got the letters of correspondence to refer to in your argument but don’t worry if you do not.
2. If your default/delinquent balance is under £300 you should take a softly softly approach and politely ask the bank or financial organisation to remove the default from your report. Use the angle that you feel it is extremely harsh and that you are struggling to provide a good life for yourself and family because you cannot get a mortgage or loan to pay for necessities.
3. Finally, if you have exhausted all possibilities and have written and replied to all letters sent to you, the only choice left is for you to start a programme of repair for your report. This isn’t 100% effectively but it does leave plenty of consumers happy. This basically involves starting up credit agreements where possible (if needed anyway of course) and settling existing agreements in the proper way (avoid early termination arrangements).
Default balance over £300
This is a fairly significant amount of money and if you put yourself in the bank’s shoes for a second you will realise that – unless a genuine mistake was made – this boils down to theft. This is basically why banks take a tough stance over this and throw defaults around like grains of sand. However, if the banks do not take the proper course of action in serving you with a default then they are robbing YOU in the sense that you are unable to purchase a house for example. That is why their practice needs to be scrutinised in the same way as your credit report is search.
Ask the bank if they can prove that a letter warning of a default was sent to the registered address before the default arrived on your credit report. After 2006 the banks tightened things up quite substantially but before this time their operations were quite unprofessional and filled with ambiguity. The bank should then respond to your letter with a reply – probably a standard template reply – but never the less you have you starting point.
From this point you can keep replying until they send you proof that a notice was served and also that the agreement that you entered into is enforceable. At that point you can give up and take the emergency repair steps for improving your credit report.
Default balance under £300
Most success stories in writing off defaults are usually found in cases where the amount is much smaller. This is because the agreements tend to be of a more trivial nature such as mobile hone contracts etc. Having a mobile phone and forgetting to cancel the contract after the 12month period (which you made payments for without problems) should not prevent you from buying a family home. Okay, so this is an extreme example but one which we have heard on more than one occasion.
Be nice, be polite, get to the point, don’t waffle, address it to the bottom of the company pyramid and work your way up until you get a reply from the very top. Hopefully by this point you will have received a positive response but if not following the following last resort to repair your credit rating.
Repair your Credit Rating
Your credit rating is key to a progressive life. Without a good credit rating you will get nowhere unless you are already there – if that makes any sense! You need to make sure it is as immaculate as it can be and no matter what the state of the economy (eg. If there is a credit crunch of any description) you can assure the financial establishments that their money is safe with you.
Step 1
Open an account similar to the Natwest Step account which offers you the opportunity to open a basic account and as you prove your worthiness of managing your account they will offer you debit card, then an overdraft, then an overdraft extension, etc. etc. such progression looks very good on your credit profile.
Step 2
Be smart, realise that a credit card is being used here for a very specific purpose and is not meant for borrowing money over many months or even years. Do not use it as an alternative to a loan.
Step 3
Do not buy a load of new gadgets. Instead buy 1 or 2 and get credit for them choosing to pay the balance over as long a period of time as possible. The more small agreements you have over long periods the better.
Aug/090
Halifax: UK house prices on the increase
According to one of the UK’s largest mortgage lenders, house prices are now rising at a constant rate adding weight to the arguement that the housing market is undergoing a recovery. Halifax, conducted a survey of all their properties and results showed a 1.1% increase in July alone meaning the average price of a house has increased to £159,623.
Increases in average house prices have been hard to come by since October 2007 when the last quarterly increase took place. However, in the 3 months prior to July house price had already increased by 0.8% on the previous quarter.
It is one thing being told this by estate agents and mortgage lenders, but when large private housebuilders make similar claims we should take notice. Taylor Wimpey said it was seeing signs of a turnaround, with its sales rising in the first six months of the year. A company statement read: “there are signs that the situation is beginning to improve.”
Aug/090
HSBC and Barclays Announce Profits
It was announced today that, as expected, 2 of the big 5 UK banks have released their profit figures for the first half of 2009. The total profits for HSBC and Barclays have hit the £6m mark sparking fears of short selling and bonus culture dripping back into the banking system.
The profits are potentially a good sign for the economy as long as the temptation to jump straight back into big bonuses is resisted in the long term and, of course, both Barclays and HSBC refused help from the Government when the financial crisis was at its worst so far so they have every right to if they wish.
Barclays and HSBC both said they were pleased with their results, although they did point out that debts on a substantial scale still exist.
Jul/090
Direct Mortgages - The best on the UK market
Mortgage brokers have been dealt a major as The Times Online report that 2 thirds of the mortgages on the market are available through the lender only and the previously commonplace practice of your mortgage broker contacting the lender on your behalf to negotiate a deal could soon be dead in the water. As if this news wasn’t bad enough, many of the deals are actually at a marginally better rate - especially if the consumer visits their branch to arrange it.
The statistics behind this story reflect a gloomy forecast for mortgage brokers. Last year over 70% of mortgages were only available through a broker but clearly the credit crunch has had a huge impact on the banking system and ideas and recommendations that would otherwise have taken years to come to fruition have now become the way of life.
Another reason why banks are doing this is to get a grip on the flow of mortgages being dealt out. They also believe that they can get a better feel over whether handing a mortgage to a consumer is a good idea.
Statistics from Moneyfacts.co.uk
Story from: The Times Online
Jul/090
What would Cristiano Ronaldo fee of £80m buy you?
As Portuguese football sensation Ronaldo made his switch from Manchester Utd to Spanish giants Real Madrid, we thought we would analyse the fees involved. The sums of money that have been mentioned have been widely been described as ‘astronomical’ and although public money has not been directly involved in the transfer - a deal of this size will undoubtedly affect the consumer. So, what exactly will Ronaldo’s fee of £80m buy your average consumer?
The Maltese Falcon, an £80 million yacht that its designers claim is the largest and fastest personal sailboat in the world. At almost 90 meters in lengths the yacht has/needs three masts of 57 meters in hight and 25+ tons in weighth, rotate depending on wind direction. To maximize speed, the sails are trimmed to the wind by rotating the mast – thus making the boat much more aerodynamically efficient.
Arguably the UK’s wealthiest artist is selling his diamond skull creation for £80 to an investment group. Damien Hirst’s business manager, Frank Dunphy, explained that the platinum skull, studded with 8,601 diamonds, had been on the market since mid 2008 when it was shown at the prestigious Cube Gallery.
If reports are to be believed, 80 million pounds could get you a football club - and a big one at that. When Mike Ashley took over Newcastle Utd in 2007, it was clear the fans were not taking to him the way he had wanted. After a serious of unfortunate incidents Newcastle ended the 07/08 Premier League season safely away from relegation. However, exactly 1 year later they found themselves with Championship status and a huge loss in value. Mr. Ashley must now accept a loss of almost 70% on his original investment as he tries to cut his losses.
The fee for the footballer, however, was not the only talking point. Ronaldo is not believed to be one of the worlds richest footballers with a salary of 170,000 pounds per week. We decided it would be ‘fun’ to break down his earnings to let you know exactly what he earns over a given time period. So here goes…
8,840,000 per year
736,666 per month
24,285 per day
1,011 per hour
16.85 per minute
28p per second
It’s alright for some… I’m happy in my job as a blogger staring at a computer screen all day every day. Thanks anyway!
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