Christmas is coming - A time for decorations, songs,
over-eating, gift giving, visiting the family, consumer spending
and the increasing of personal debts. Bah humbug.
While most people see Christmas as a joyful period there are
many who see it as a time of financial worry as they cannot
afford to buy presents for everyone. For these people it is
often the doorstep lenders who will be getting fatter rather
than them and their family. The temptation is to simply put the
expenses on the credit card or take out a loan to be paid back
on the never-never. Unfortunately this can lead to disastrous
results in the long-term, as the recent increase in the number
of repossession order applications are testimony.
There are a few simple rules can help to prevent a post festive
period financial hangover though.
Firstly, don't ignore the problem. The longer you leave a debt
problem, the worse it will become.
If things seem desperate then contacting a free organisation
such as National Debtline (0808 808 4000) can help by giving
debt advice over the phone, or by providing booklets and fact
sheets, as well as helping to set up personalised debt
management plans.
Next, maximise incomings and minimise outgoing expenditures.
Look out for anywhere costs can be reduced. Online retailers
don't have to pay for expensive premises, and so buying presents
online rather than in the shops is often a great money saver. Be
alert for shop sales and make the most of them.
If you already have debts, then you need to be wary of borrowing
more money without some serious consideration and qualified
professional independent financial advice.
Taking out a low rate secured loan to cover previously unsecured
debt may seem like a sensible idea, however, should you fail to
meet the payments you could lose your house. If you have
unsecured loans, your home may not be safe either. Debt
counselling charities have recently become increasingly alarmed
regarding a growing trend by some of the high street lenders to
issue "charging orders" on borrowers' homes in order to recover
bad debts. This means that by going through the courts, the
lender can change an unsecured loan agreement converting the
debt to be secured on the borrower's house, whilst still
charging unsecured interest rates. A consolidation loan may seem
sensible; however this will mean borrowing more money, over a
longer period this will mean more interest to pay in the long
run.
If you decide to take out a loan, then you need to ensure that
you are getting the best rate that is available. The big banks
like
Barclays have
online facilities showing their current rates , and other online
finance companies such as Moneynet provide free facilities to
compare rates
for hundreds of secured loans, unsecured loans and even adverse
loans.
Never use a doorstep lender no matter how desperate things seem.
Radio 4's Money Box recently highlighted the plight of people in
Southampton where the typical doorstep lender's APR was a
massive 177%. For people on low incomes trying to regain control
of their finances, this will lead to further problems and cause
existing debt to spiral out of all control. Recent initiatives
for people who have had problems getting affordable credit,
known as Community Development Finance Institutions (CDFIs),
have started springing up around the country. These are funded
by a collaboration of public and private money including some of
the major banks, and specialise in providing personal adverse
loans and small business loans to people who have previously
been turned down by the banks. CDFIs usually charge an annual
interest rate of up 24%, which is higher than many standard
non-adverse high street loans due to the increased levels of
risk and additional advice involved with this kind of lending
but it is also much lower than the unregulated alternatives.
When you look at paying off existing debts, you need to decide
which are the most important and deal with your priority debts
first. Ensure mortgage and rent bills are covered first, next
pay off essential utility bills and council tax, before trying
to pay off any unsecured loans.
As well as reducing any monetary outgoings, it is also important
to ensure that you are getting all the incoming money that you
are due. Checking with the local Citizens Advice can be useful
for help on debt, benefit, housing, legal, discrimination,
employment, immigration and consumer issues. They will be able
to advise you on most areas of concern, including whether there
are any government payments to which you could be entitled.
Debt problems can seem insurmountable at the best of times, but
over the Christmas period it can become completely overwhelming.
Start by maximising your incomings, minimising your outgoings,
and careful budgeting and purchasing. Ensure you are getting the
best loan rates through free online information comparison at
sites like Moneynet, and speak to free independent advice
services like National Debtline and Citizens Advice; it is
possible to retake control of your finances and have a happy
Christmas.
Disclaimer: All information contained in this article, is for
general information purposes only and should not be construed as
advice under the Financial Services Act 1986.
You are strongly advised to take appropriate professional and
legal advice before entering into any binding contracts.
Useful resources:
Moneynet
loan comparisons
Barclays
loans
Released by
bigmouthmedia
About the author:
Richard lives in Edinburgh, occasionally writing for the
personal finance blog
Cashzilla, and listens
to music no one else likes.
