With the masses of Debt Management sites around on the internet, there is a lot of information about debt management out there, but do any of them tell you exactly how debt management works?
A lot of these debt management sites will tell you that they can lower your monthly payments, freeze your interest and charges and all you have to worry about is making sure you pay the debt management company your arranged sum of money each month. Sounds great, but where does your money go and what does the debt management company get out of it?
Ok to start with any self respecting debt management company should be properly licensed. Make sure they have a valid consumer credit license and a data protection license. You can check their consumer credit license stacks up at the following site http://www2.crw.gov.uk/pr/Default.aspx.
Do a search on the company, have a read on some of their reviews. If you see nothing but complaints against the company then it would be advisable to stay clear and find another company.
A good debt company will begin to talk you through your current debt situation and will ask you for personal debt information. They will need to build a picture of your current financial situation by taking down a list of your creditors, outstanding balances and an idea of what your monthly payments are. Once they have this information they will take you through an Income and Expenditure which will list what money you have coming in and what money you have going out. This will be fairly thorough and will take approximately 20 minutes to go through.
Now the advisor has in front of them your income and expenditure in black and white. This will show them how much you can afford to pay towards your debts. Feel free to try this on a piece of paper and see how much money you have left at the end of each month (your disposable income). Please note not to include items such as “beer money”, only essential living costs are allowed.
The advisor should now begin discussing your options and may take you through a few scenarios. If you do have some disposable income available then they might point you in the direction of a Debt management plan or a Scottish Trust Deed. For this instance though we shall focus solely on a debt management plan.
The advisor will discuss with you how much you feel you are comfortable paying each month towards your debts and may propose a figure to you based on your income and expenditure. If you are happy with this figure then the advisor will post out some paperwork to you so that you can digest the information at your own leisure and not have to make an on the spot decision.
If you are happy with everything and wish to proceed with the plan then you will be asked to send some paperwork back so that the debt advisor can proceed with setting up your debt management plan. You will be asked to sign an authority form so that the Debt management company has permission to act on your behalf when dealing with your creditors. You may also be asked to sign a standing order form.
With all the paperwork back, your advisor can proceed with setting up your Debt management plan. Your information will be checked with the details you gave over the phone and will be drafted up to send to your creditors. Upon receiving your first payment, your advisor will send out a letter of intention along with a copy of your signed authority to each one of your creditors. They will also ask for the most up-to-date balances from each one of your creditors so that they can have accurate figures on their system.
The intention of your advisor will be to setup an arrangement with your creditors. This will enable them to agree with your creditors a fixed payment each month based on your monthly payment. Quite often this payment will be lower than your monthly contractual payment as you are already struggling with Debt and are seeking professional advice. Your advisor will demonstrate you are struggling with your contractual payments by sending them a copy of your financial statement.
During this time it is unlikely any payments will be made to your creditors and often a debt management company will retain your first 2 payments as a setup fee.
Having received an up to date balance from all your creditors your debt advisor can then set about making an offer of payment to your creditors. This is done on a pro-rata basis, based on your payment amount. It is also at this stage that your debt advisor will also request that all your interest and charges are frozen due to the fact you are struggling with your payments. The reality is that not all creditors will freeze your interest payments but will often reduce the interest percentage to a more realistic amount.
Setting up arrangements with your creditors can be a timely affair. Correspondence between a debt management company and a creditor can often be slow. It can take anything from 1 – 3 months from initial contact before a creditor will accept or decline the debt management company’s offer of payment. To be cont……….
Being in debt can be an incredibly scary prospect and one that all too many people are becoming used to these days. Debt in the UK is higher than it has ever been before and the effects are being exacerbated by the fact that lenders are increasing their interest rates, unemployment rates are rising and many people in debt are failing to get their debts sorted out before they get out of control. However, if you consider how debt affects your credit rating, you will soon see that it can be much better for your long term financial health to bring it under control right from the start.
Your credit rating is essentially a comprehensive financial history that includes information about your credit, your payments, your financial links to other people and the applications for credit that you have made. Credit reference agencies compile the information so that it effectively gives a snapshot of your finances so that lenders and other such financial institutions can make an informed decision as to whether to lend to you or not. As such, your credit rating is a very important piece of your life. If you neglect it or damage it in any way then you could find it difficult to get credit in the future. This is why it is important to find out how debt affects your credit rating and avoid the negative impact it may bring.
You may have heard that debt is good for your credit rating and in a way it is. Having a credit card and buying something on it will help you to build your credit profile in the first place. After all, without credit you cannot have a credit rating. Similarly, having a mobile phone and other such credit agreements in place will help to enhance your credit rating because it will ensure that you appear to be financially responsible to lenders. The problem comes when you build up excessive debt, miss payments or have a debt arrangement in place, such as an IVA, a Scottish Trust Deeds or bankruptcy.
In truth, to lenders it is all about the risk. Will they get their money back if they lend to you? Will you default on payments? These considerations are important and help to explain how debt affects your credit rating. First of all, lender will look at the level of debt that you have and, if it is at a manageable level, they will probably decide to lend to you, assuming that you are maintaining payments. However, if you have an excessive level of debt then they are more likely to turn you down. The level of debt will also elevate or lower your credit rating without any searches being performed.
The second point relates to missed payments and any difficulties you may get into when in debt. If you begin to miss payments then you do not project the image of a responsible borrower and so your rating will drop as a result. The more payments you miss, the more hits your credit rating will take as a result. In addition, having multiple lines of credit can have a negative impact on your credit rating because it also elevates that risk factor.
As you can see, debt can affect your credit rating in a positive way as long as you keep it to a minimum and under complete control. However, as soon as you lose that control or build up debts that can be considered approaching the limit of your means then you can expect the negative impact to hit. As such, it pays to be conscious about the level of debt that you have as well as how well you are managing it. Keeping it under control is imperative because you never know when you may need your credit rating to be in the best of health.
TrustDeeds.co.uk was launched in 2006 to help scottish residents struggling with debt problems with solutions tailored for the scottish such as a Scottish Trust Deed or Sequestration.
Since we started, we have helped thousands of clients with their debt problems and continue to be one of the leading debt help sites in Scotland. All enquirys are passed through to our partner company Mackenzie Stewart based in Glasgow, and are serviced by their professional debt team.
It is a fact that more people are in debt than ever before. As a result of the irresponsible lending of financial institutions and, in some cases, irresponsible borrowing of consumers, many of those that are in debt are struggling to make their repayments from month to month. Imagine, then, what life is like for those people that struggle to make ends meet as a result of the debts they have and the fact that they have lost their jobs as a result of the recession. Dealing with debt problems when on Job Seekers Allowance (also known as JSA) is never easy but it is essential to do just that rather than ignoring them because they will not go away.
According to a Consumer Credit Counselling Service report in September 2010, the average debt owed by those on Job Seekers Allowance is £15,412. This is an excessive amount of the people that are maintaining jobs but those without employment would not only struggle to meet repayments on a monthly basis but would also find themselves becoming entrenched deeper and deeper in debt. It stands to reason then that unemployment makes living in debt and indeed dealing with debt problems when on Job Seekers Allowance far worse than it would otherwise be.
It is a fact that finding work would help individuals dealing with debt problems when on Job Seekers Allowance. It actually serves a number of purposes. For example, finding work and coming off benefits would not only allow individuals to make repayments on time every month but also opens up a world of possibilities as far as debt management is concerned. Balance transfers on credit cards and debt consolidation loans are often available to those with good credit records who are in work. However, life is not always as simple as that. Although the number of people on Job Seekers Allowance has been coming down slowly, jobs are still scarce so finding employment is easier said than done.
So what can you do about debt problems when on Job Seekers Allowance if you are struggling to find work? Well, the first step is assessing your finances to see what can be done about your debts. You can do this yourself by looking at your income against your outgoings. If there are expenses that you can cut out then do so. You should also look at your debts to see which ones are the most expensive and prioritise paying them off first. This will relieve the pressure on your financial situation.
There are also non-profit debt agencies and counselling services that you can access for free if you find that you are having problems with debt and are on Job Seekers Allowance. It is worth taking a look at what help there is out there in this way because such services can make you aware of debt management options that you may not necessarily have heard of. As your income is limited, they can also advise you on how best to use it in relation to your household expenses as well as your debt.
As millions of people are currently on Job Seekers Allowance and many of those are in debt, seeking help and examining your options is nothing to be embarrassed about. Instead, it is something to be commended because you are taking action rather than ignoring it in the hope that it will go away. It will not go away but may indeed get worse if you do not take appropriate action from the start. It is important to bear in mind that there is help available and there are options for you to consider so look into it today!