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Loans Are Not Just For Christmas. Surviving The Holiday Debt Hangover.
By: R.Green
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 ( http://www.barclays.co.uk/loans-index/
) have online facilities showing their current rates , and other online finance
companies such as Moneynet ( http://www.moneynet.co.uk/loans/index.shtml )
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 ( http://www.moneynet.co.uk/loans/index.shtml )
Barclays loans ( http://www.barclays.co.uk/loans-index/ )
About the Author:
Richard lives in Edinburgh, occasionally writing for the personal finance blog
Cashzilla (
http://cashzilla.blogspot.com/ ), and listens to music no one else
likes. |
