| Product: |
Debt Help in General |
| Date: |
26/06/06 (498 review reads) |
| Rating: |
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Advantages: Lots of people who can help
Disadvantages: watch out for parasitic companies that want to fleece you
Just before I start, I’m not sure what is expected in this category, whether it is about debt advice services or opinions about debt. This could even be completely off-topic! Anyway, my fingers are itchy and want to get a-typing! Also, I’m not too sure about what the ratings are on this. I will presume it means whether or not debt advice is a good thing or not. I’m going to start off with a story and some anecdotes, and then talk about getting help later (skip the story if you want, otherwise make a pot of tea!).
Debt is a growing problem and can affect many lives quite seriously. Not all debt is bad (mortgages, for example), but more and more, society seems to be relying on credit to pay for essentials such as bills, food, clothing. It’s a ticking time-bomb that may soon explode in our faces. Here, I hope to give some information on debt and how to avoid or cope with it. Having been in debt before (and still am!) with a couple of CCJs I have a good understanding of the trouble people face. However, I’m not an expert in this field and this review is only my own personal experience and thoughts. If you are having trouble with debt (or merely advice about debt / loans), seek professional advice from organisations (some listed at the bottom). Do not take this review as advice – I don’t want to get sued!
The Temptation
You can’t walk down a high street without being mugged by some credit card representative hoping to financially ruin you, and shop staff have a new mantra of asking if you want one of their store cards every time you purchase something.
Like, “Yeah! Of course! I don’t really don’t mind paying your excessively inflated interest rate which is calculated by using quantum theory. In fact, I’ll have two cards!” (I’m getting myself one of those t-shirts printed with “No I don’t want a f*@#ing store card).
Tabloid newspapers seem to carry more ads for credit than they do news stories. Daytime TV tells you that you MUST have a loan and you CAN afford it. And getting into debt has never been easier than before. You don’t even need to get off your backside. A click of the mouse can lead you to lots of new temptations - online casinos and betting sites, to name just two.
It’s like using monopoly money. You can have all those lovely things without dipping into you own pocket. Just tap in a few numbers and it’s yours!
Companies shove credit and debt down your throat. Can’t afford that dream holiday or car? Don’t worry! Easy repayment terms! Oooh! You don’t have to pay for that sofa now – you only start paying three years later (when you’ve just been made redundant). Commission-hungry staff (shame on employers who force their staff into this) pester you until you sign on the dotted line - without the opportunity to read the contract. Even making an enquiry to your bank now leads to a frustrated rush to get off the phone before you say yes to the offer of a “special” loan.
I remember reading a report from a debt help company. They sent seven students out to the shops to try and get as much credit as they could. Within 2 hours, one student had amassed £10,000 of credit with various store cards and loan agreements. I was shocked at how this could happen and done a little research myself (a la “Supersize Me”). If I was asked if I wanted credit, I had to say yes, but I also had to tell the truth. I have had bad debts, I have CCJs and I am a student with little money. I could not believe that they still tried to apply for credit. One person at a stall for Barclay’s credit card even said “Oh don’t worry, you can pay it all off with your card”! I was appalled at how these people could be so irresponsible. Out of six different opportunities to get credit, not one advised that maybe it would be a bad idea for someone like me to proceed. I had to stop the applications myself.
Some debt is impossible to escape (unless you’ve won the lottery). Mortgages are necessary to buy a house for example. Most debt is, or should, be unnecessary. The problem is that luxuries are more and more being seen as essentials, and to get those essentials, you either borrow because you want it NOW! NOW! NOW! or save up for it (“Save? But that’ll be years! No – gimme a loan! Gimme! GIMME!”). And the more essentials we have, the more we must borrow until it all comes apart like your dear granny’s knitted cardigans.
There may be trouble ahead….
Pretty soon you’re up to your eyeballs in debt. The loan to get the people carrier to drive little Johnny down the road to school doesn’t seem like such a good idea now. You still haven’t paid for that Seychelles trip (“why didn’t I just stick with a weekend at Blackpool?”) and payments for the new sofa start next week. Oh it’s all right! Just make a few cutbacks, put a couple of extra hours in at work and it’ll be all hunky dory! But then there is no overtime and you’ve made all the cutbacks you can.
Oh well, the council tax can wait until next month. But then the mortgage is due as well. I know, save on petrol. Johnny can walk to school – Oh God! The health club subscription! Cancel it! Oh… I can’t -12 month contract…contract…contract – PHONE BILL! SH#T! TV Licence! Oh – wait a minute, just get another loan – pay off all of this and then I’m fine! Just one new loan to pay each month and I don’t have to pay for everything else.
Except that these bills just paid off will keep coming back. Oh I can put everything on the credit card.
“Sorry, but your card’s been declined. Have you any other….hello…hello?”.
Now come the reminders in the post. But that’s ok. You can just leave one of them this month and pay it next month instead. Or you can say that you’ve had an emergency – your granny is sick (knitting too many cardies) so you had to spend money taking care of her. But she won’t be sick forever, and every other excuse has been used twice over.
The letters still come but now you don’t even open them. Ah1HA! If I pretend I don’t exist, they’ll give up asking for money and go away!
But they don’t go away and the requests turn into demands.
You can’t sleep because of worry.
You wake up each morning dreading the post.
The sound of mail hitting the floor turns your stomach into knots.
Demands get thrown away, phone calls go unanswered and you feel trapped, desperate and depressed.
Then the bailiffs arrive, or a court summons.
Your life is undone.
But it doesn’t have to be this way. For many, debt is a way of life, and some cope with it all their lives. For some, it is not because they have gone wild, but just that they simply don’t have enough money to get by, whether it be down to bad fortune or some silly mistake made.
Here are some ideas
Don’t get into debt!
Easier said than done, but it’s a sure fire way to stop bailiffs! If there is something that you want but can’t afford – save for it. It may take longer to get what you want, but it becomes yours for keeps.
Plan ahead
If you are certain that you need credit, make plans. Don’t borrow more than you can afford. This does not mean that you will have 2p left over after taking everything into consideration. It means that if anything goes wrong, you can cope financially. Stretching yourself will only lead to trouble later on.
Once you are sure that you can take on some debt, shop around for the best deals.
NEVER EVER sign up to something there and then. Always take documents home to read and think through. Although there are cancellation periods, it is easier to take on a loan than to get rid of it. If a creditor is serious about business with you, they will be more than happy to allow you time to consider. If they pressure you, just walk away.
If trouble starts…
Don’t ignore the problem.
Don’t think for a second that the problem will go away, or that you will be forgotten about. THE PROBLEM WILL NOT GO AWAY BY IGNORING IT – IT WILL GET WORSE!!! The hardest thing to do is to accept the situation and ask for help. But once you have done that, things get a whole lot easier!
Get pro-active
If you think you may be getting into trouble, contact your creditor(s) and let them know. A good company will normally allow a payment holiday, or allow some re-arrangement in payments – even if it is temporary.
If the situation is to be more permanent, usually after a couple of defaults, there are arrangements you can make – more a bit later.
Don’t take on extra debt
The last thing you want to do is to take on extra debt. Using credit to pay credit is a bad idea and leads to more problems. Consolidation loans may be useful to reduce interest for example, but for those struggling, it will lead to more debt. What makes you think that you will cope with more debt if you are struggling now? And forget about damaging your credit score – it won’t matter because you should not want to be applying for more credit anyway.
Don’t pay for services
No I don’t mean you gas bill. Lots of companies offer to reduce your debt or manage them for you. THESE COMPANIES ARE PARASITES!! (Go on! Sue me! I’ve got no money!). They attract you with statements like “wipe out 75% off your debts”. Wow! Three quarters of a debt gone just like that! Erm…. No.
What they do is buy your debt from your creditors, usually for less than what is owed. Your debt then belongs to that company and you pay them so much each month as opposed paying the original creditor. This usually works out to be cheaper each month, but overall the cost is far greater than what was originally owed, which is how they make their money. Another method is that they negotiate a reduction in payments with your creditors and they take some of the money as a fee.
THESE SERVICES CAN BE OBTAINED FREE OF CHARGE ELSEWHERE – see a bit later.
Making arrangements
Creditors want their money back, and it is owed by you. That is a definite. However, you can negotiate repayments with them if you have been struggling. The following will be done for you by organisations I will list below.
First, you need to work out how much money you have. Do this by adding up ALL your income.
Then, deduct your outgoings into these categories:
1. Outgoings that MUST be paid (priority bills). These include things like council tax,, utility bills, food and clothing.
2. Other bills. Things like transport (petrol, bus fares), phone bills and the like. These must be reasonable – explained in a bit.
Then work out money that you owe to creditors. This is split into priority debts, like secured loans (mortgage), and non priority debts, such as a catalogues, store cards etc.
The money that you have left over is then split between all the creditors. The amount that each one gets depends on how much is owed to them compared to the whole debt. So if half of your debt is owed to a catalogue company, then they will get half of the money left over.
Debt collection Agencies
Some creditors will sell your debt to a debt collections agency. These companies do all the hard works for the creditor, and so save them money (and time) in having to deal with it themselves. Their job is to “negotiate” with you how much money you can afford to pay. Most of these companies are reasonable and sympathetic, and they will help you in trying to sort the problem out. However, there are some of these companies that deserve nothing more than to be pi**ed upon. They target their staff (I’ve already covered this under my call centres review so I won’t go off on one!) on how much money they should request from debtors and make people’s lives hell. They say that they cannot accept less than such an amount, pressuring you to agree to their terms. It can get scary. They tell you that your offer is not acceptable and they can only accept three times as much as you can afford. They will make threats about court action, bailiffs etc. and you get so scared that you eventually just agree to pay them what they want. But if you can’t afford that amount, then you will end up in trouble later on.
NEVER agree to their requested amount if you cannot afford it. Write in to them and show them your figures, discussed below.
When making the offer, it has to be reasonable. A creditor will not be happy if you offer them £5.00 a month when they see you spending £30 a month on health clubs or £100 a month on phone bills. At the same time, you should not be offering more than you can afford (something that is very easy to do because it gets people off your back – for a short while anyway, but then they will come back when you fail to make the payment you promised) If your figures are correct and fair, then the creditor should have no reason to refuse your offer. In the event that you are taken to court, the magistrate will look at the figures you have supplied and, if they are reasonable, will enforce those figures. If, however, they are not reasonable, then the magistrate will make alterations that you can possibly ill afford. Like I said, there are organisations that will help you with all of this (or do it for you).
Organisations to help you:
Citizens Advice Bureaux
This is a voluntary organistaion that holds a lot of sway with financial companies. They are staffed entirely by well trained, sympathetic and helpful volunteers who are well trained in various disciplines. Their services are free of charge. Here is their wesite: www.adviceguide.org.uk. The website includes tons of useful information, not just on debt. Their number can also be found in any telephone directory, and they should have an office near to you.
You can either speak to an advisor over the phone or, the better still, you can speak to an advisor face to face. If you do see one, take in ALL documentations with you (wage slips, bills, agreements, letters etc) and they will negotiate with creditors on your behalf and also calculate your finances for offers for you. Remember that it is voluntary, and may not be open all the time – it can also be quite busy. The only recognition these people get is payment of expenses. They are the financial equivalent of the NHS, and so should be thanked and supported.
National Debt Helpline
Free, confidential and independent advice is available from these wonderful people. Their organisation is dedicated solely to debt issues, and includes information packs, budget calculators, sample letters that you can use to write to creditors, and a debt management plan which helps with repayments as mentioned above.
You can access this website on www.nationaldebtline.co.uk or phone or call 0808 808 4000
WARNING!!
Be aware of other companies offering “free” debt advice or companies that promise to make all your financial ills go away. These are usually loan consolidation companies, and there are many of them about. I have mentioned this several times before, only because they charge you for what you can get free elsewhere. Do not accept their offers or slick talk – got to the CAB or Debt Helpline for the same services free of charge.
In summary:
If you are in debt – you are not alone.
Do not be frightened by those nasty looking letters.
Nip the problem in the bud – it’s better to sort out problems before they become crises
Don’t ignore the problem. It WILL get worse if you ignore it.
Get help. There are people who can and are willing to help and who understand what you are going through.
If you've read all of that then thanks! I hope it helps someone.
Summary: Get help before it gets too late.
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