WHAT CAN YOU DO?
If you are struggling to repay your debts, you have a number of options, which are (in no particular order):
- Reorganise your debts to make them more affordable - examples of this are Debt Consolidation, remortgage
- Annul some of the debt and repay only what you can afford. This is the approach taken with the IVA solution
- Annul all of the debt I.e. Declare yourself bankrupt
- Increase your income
- Decrease your expenses
- Raise some capital for example by surrendering an endowment policy, selling some items of value etc
This is not a totally exhaustive list, but includes the main options available.
One of the most important first steps is to keep accurate records of your incomings and outgoings. You will not be able to budget unless you have a clear picture of your income and expenses. We recommend using Personal Accounts an easy to use package for the pc to record home accounts. If you purchase from the link to the right and then struggle to use it, simply contact us and we’ll give you 1 hour tuition free of charge. Any further time after that will be subject to a very small charge.
OPTION 1 - REORGANISE YOUR DEBTS
DEBT CONSOLIDATION
If you are really struggling to meet all your commitments, one option is to consolidate your debts. This may mean taking out another loan, but one at a very competitive rate which will allow you to pay off all your other debts and leave you with just the one loan to pay off. This can result in a reduction in your monthly outgoings, but it should only be used in conjunction with a proper Debt Plan as if you continue to keep spending at a high level, you will end up with even higher debts than you started with. You should also be aware that this method reduces the monthly payments, but generally increases the Term (the period over which you have to keep paying). Recently we took out a loan at 5.75% APR and paid off several Credit Cards at rates of between 11.9% and 15.9% APR. This resulted in a big drop in our monthly payments.
REMORTGAGE / EQUITY RELEASE
If you are a home owner, then remortgaging is an option to consider. This is very similar to Debt Consolidation above, but uses your home as security against the loan. The advantage of this is that a lower rate can generally be obtained, thus further lowering your monthly payments. This step does have to be carefully considered and again done in conjunction with a proper Debt Plan, as if you fail to keep paying the payments, you could end up having your home repossessed. You must find out all the fees that apply first before committing to this approach - for example you current lender may charge a fee to end the mortgage early. Often if you remortgage with your existing lender, they will waive any fee, but you must check with them first.
Be very wary of offset mortgages, though, where interest on savings are offset against interest on borrowing. It is too easy to keep borrowing against the loans, and you can end up owing even more than when you started unless you are very disciplined and have a solid financial plan.
OPTION 2 - ANNUL PART OF YOUR DEBT
INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)
This is a method of reaching an agreement with all the organisations that you owe money to (your creditors) that you will pay what you can reasonably afford for a period of 5 years and any outstanding debt is then written off. The creditors will stop applying interest to the debt as soon as the IVA is fully approved by all parties. You must consult a licensed Insolvency Practitioner to calculate the payments that you can reasonably afford for each debt and negotiate an agreement with each creditor. All your equity and liabilities will be taken into account. That means if you are a homeowner, any surplus equity (i.e. The amount by which the market value of your home exceeds the value of the mortgage) may be considered, along with any savings or endowment policies you may have.
OPTION 3 - ANNUL ALL OF YOUR DEBT
BANKRUPTCY
If your debt problems are really serious, you can apply to be declared bankrupt. This will mean you are no longer liable for any outstanding debts, but is not an option to consider unless it really is the last resort. If you are a home owner, the Official Receiver can force you to sell your house in order to reduce your liabilities. There are strict regulations on what you can and cannot do once you have been declared bankrupt. The bankruptcy order will show on your credit file for 6 years, which could cause you problems getting any credit even after you have got your financial situation back on track.
OPTION 4 - INCREASE YOUR INCOME
This may or may not be a feasible option. Could you get a better paid job? Is there somebody in the household who is not currently a wage earner who could get a job and contribute more to the household income? Could you, possibly on a temporary basis take on another job.
Another option to explore is making money online. Why not try setting up a blog and having adverts on it? This is so simple and easy to do and the blog can cover absolutely any topic you like. It could be about your hobby, some interest you have, a health issue or just general ramblings. Check out Adsense 4 Blogs for a great and inexpensive guide on how to achieve this.
Another option to consider is to find a source of PLR (Private Label Rights) products. These are ebooks that allow you to change them, call them your own and sell on places like eBay etc. For a FREE trial, check out the link to the right.
Do you, or does anyone else in your household, enjoy a craft or hobby that could be turned into a money making venture?
If you’re tempted to try your hand at gambling on-line, then you should check out products.BlackwaterValleyVoice.co.uk/Roulette.html first.
OPTION 5 - DECREASE YOUR EXPENSES
Look at all your expenses and consider how essential they are. For example, could you drop your mobile to a lower tariff? Could you shop around for a better deal? Do you still get your energy from the “big” expensive companies. Try looking at the Utility Warehouse Discount Club. They do some great deals, not only for gas and electricity, but also for mobiles, home phone and Internet access. They give guarantees that they will beat the prices of their more well known competitors.
OPTION 6 - RAISE SOME CAPITAL
Do you have an endowment policy that could be surrendered or sold to raise some cash? Selling is much better - try endowment surrender plus (esp).
Do you have some items that you could sell? We will shortly be having a feature on selling on eBay, but if you’d like info in advance, contact us using the enquiries form.
Raising capital is only a short term measure, however. It can be used to overcome a temporary debt situation or as part of an overall plan, but will not on it’s own solve a serious debt problem.
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Did you rack up a big Credit Card bill buying for Christmas? As a father of 3 young children, I know only too well how expensive everything is at Christmas. And how easy it is to loose track of how much you’re spending. Then the Credit Card bills hit the doormat and panic sets in.
The first step in tackling your debts is to create a plan. You need to list out all your incomings, all your “fixed” outgoings (such as gas, electric, phone, food, petrol, insurances etc) and all your credit bills, be they Credit Cards (use the minimum payment), loans or mortgage payments. Add the “fixed” outgoings to your credit bills plus an allowance for general spending and subtract this from your income. The result is your “Net Disposable Income”. This is the amount that you can decide how you are going to use to pay off your debts.
Check out Debt Free In Three. It does have a strong American bias but contains some excellent advice and the guy that runs the site is extremely helpful and prepared to give individual advice. There is a small cost, but the service and products you get are excellent value for money and are a worthwhile investment. Clint gives personal advice and lifetime support. If you follow all the advice given, you could save a fortune in interest and be totally debt free in 3 to 5 years!! Clint gives a money back guarantee, so if you don’t think the package was worth the money, you get every penny of your money refunded. He is currently offering a good discount, so I recommend you go and sign up as soon as possible.
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HELP WITH PERSONAL ACCOUNTS
If you purchase the Personal Accounts software via the above link and need some help getting it set up, contact us and we’’ll give 1 hour of free help
FREE E-BOOK
A free e-book on Coping With Debt is available. This e-book expands on this article and can be downloaded
