Tag Archives: debt management plan

Credit Cards, Debts, Financial, Financial Management, Financial Services, Money, Personal Finance

Debt Management Could Help With Unmanageable Credit Card Debt

Responding to a new report suggesting that there are more than 200,000 ‘secret credit cards’ in the UK – cards that are kept hidden from the holder’s partner – financial solutions company Think Money has advised consumers that while credit cards can be a useful means of funding purchases, borrowers should be careful to ensure that they can make their repayments in order to avoid debt problems in the future.

thinkmoney

Research from Halifax Credit Cards showed that people in the UK hide an estimated 217,000 credit cards from their partners. Reasons for doing this included buying items the card holder did not want their partners to know about, hiding existing debt from partners, or simply having emergency funds available.

According to credit card trade association APACS, there are 30.2 million credit card holders in the UK. Total credit card spending in 2008 was £126.2 billion.

Melanie Taylor, Head of Corporate Relations for Think Money, said that while there is nothing specifically wrong with having a ‘secret’ credit card, card holders should ensure they are hiding it for the right reasons – and not in order to hide problem debts.

“It boils down to the same principle as having any credit card. Credit cards can be a very useful source of additional finances, as well as a ‘safety net’ against any unexpected costs. Used correctly, credit cards should not cause the consumer any problems.

“However, it’s when the borrower starts delaying their repayments – paying only the minimum – that the problems can start.

“The trouble with credit card debt is that the interest is a lot higher than on many other forms of credit. If the borrower does not repay the full credit card balance at the end of the month, then the interest that accumulates on the remaining balance may be a lot higher than a lower-interest alternative, such as an authorised overdraft.

“Over time, the interest can begin to ‘snowball’, and it can become increasingly difficult to repay the remaining balance. It may not be long before the debt becomes unmanageable – which is why it’s important to get debt advice at the first sign of difficulty.”

Mrs Taylor added that the relatively low minimum repayment on credit cards means that some people can take a long time to clear the debt.

“Unlike personal loans, which carry fixed regular repayment terms, credit cards only require a minimum repayment each month. This makes it very easy to delay repaying the full balance, which is how problems start for many borrowers.

“In general, we advise people to avoid making large purchases on credit cards unless they can be absolutely sure that they can afford to repay the debt in the near future.”

Mrs Taylor said that anyone who does find themselves struggling to repay their credit card debt should not hesitate to seek professional debt advice.

“Because the interest will only continue to grow, finding the right debt solution is vital for anyone who can no longer afford to repay their credit card debt.

“One such debt solution is a debt management plan, which is an informal arrangement with the lender that can allow the borrower to repay their debt at a more manageable pace. It is often also possible to negotiate a freeze or reduction in interest, which could be especially helpful for repaying credit card debt.

“However, borrowers should always consider all options available to them. A professional debt adviser can recommend the best debt solution for the borrower’s individual circumstances.”

Via EPR Network
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Debts, Financial, Financial Management, Financial Services, Loans, Money

Managing Debts When The Economy Slumps

Responding to the Fourth Quarter Economic Survey from the British Chambers of Commerce (BCC), debt management company Gregory Pennington stressed that negotiating with lenders is an important part of dealing with (and preparing for) the kind of ‘tough times’ that the Survey spells out.

“Most economic reports contain a mixture of good and bad news,” said a spokesperson forGregory Pennington, “but the BCC has stated – in black and white – that ‘There are nopositive features in the Q4 results’, going on to use words like ‘awful’, ‘terrible’ and‘alarming’. There’s no point in being overly negative, but the report clearly spells out that last year ended badly – and that businesses throughout the UK are in for a rough 2009.

“Every time a business fails, this inevitably has a negative impact on consumers’ finances – not just its actual employees, but everyone connected to the business, from its suppliers to its commercial customers. Everyone who depends on that business for all or part of their income will have to make the necessary adjustments to their lifestyle, until they can find a way to raise their income once more.

“During a period of economic turmoil and high unemployment, carrying debts can beparticularly dangerous. Anyone entering a period of unemployment with significant unsecured debts to their name is far more likely to run into difficulty almost at once: as well as paying for essentials such as mortgage / rent, utilities, food, petrol, etc., they’ll need to stay on top of payments to their unsecured debts – payments which have suddenly become much harder to afford.

“When someone (whether employed or unemployed) can’t keep up with their debt repayments, this can lead to charges and legal action, and can draw them into a ‘spiral’ of debt, in which all their efforts to reduce the debt aren’t enough to keep pace with the rate at which it’s growing. Negotiating with lenders – through a debt management plan, for example – can help them avoid this, as their lenders may agree to accept lower monthly repayments, waive charges and freeze or reduce interest.”

“Of course, surviving a period of unemployment will be easier if they’ve taken precautionary steps beforehand – perhaps when they hear warnings from organisations such as the BCC, the International Monetary Fund or the International Labour Organization. For example, some people may attempt to overpay their mortgage so they’re in a better position if they need to take a payment holiday later on. Others may choose to concentrate on their credit card debt or overdraft, trying to reduce the monthly cost of servicing their debts, as well as the overall debt itself.

“They may not be able to clear their debts altogether, but that doesn’t mean they can’t make a good start. The more progress they can make, the easier it will be to cope if they are made redundant – and if they aren’t, they’ll still benefit from reduced interest payments and increased financial security.”

Borrowers who do end up losing their job may find that a debt management plan could help them adapt to living with a reduced income more quickly. “Their debt managementrepresentatives will be able to talk to their creditors, trying to re-negotiate lowerrepayments that reflect their lower income. In many cases, lenders would recognise thattemporarily accepting lower payments (if necessary, nominal payments) could help theborrower cope until they could find new employment – or to get back on top of their debtsonce they have found it. After all, in the vast majority of cases, it’s in everyone’s interest to ensure the borrower has an opportunity to repay their debts, rather than beingdeclared bankrupt.”

Via EPR Network
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