Need Help With Debt?
Max Renwick is a senior debt management consultant with Debtaid. He has personally solved debt problems for thousands of people in the UK.
If you are having problems with debt, please call Max on 0800 0722 332 or visit the Debtaid Website at http://www.debtaid.ltd.uk
If you owe more money than you can afford to pay back, you need to bring your existing debts under control.
The starting point will always be to draw up a household budget, so that you and your creditors know how much money you have coming in, what your living costs are and how much you have left over to put towards your debts.
Many advisers claim to be able to work miracles. Just search the internet and you will find hundreds of examples of advisers claiming to be able to write off your debts or telling you that they can clear your credit card bill.
These claims are just that. A responsible debt management service will aim to bring your debts under control. The idea is to support you and help you pay back what you can afford.
Putting your living costs down on paper is a really important first step, without this information, even the very best debt management adviser will not be able to help you control your debts. They will also need to know what your income is and whether you have a job.
About debt
In simple terms, when you borrow money it is up to the lender to make sure that you can afford to pay them back.
That’s why there is a limit to the amount you can spend on a credit card or store card. Same with an overdraft or a mortgage, you can only borrow as much as your lender thinks you can afford to pay back.
Sometimes the lender gets this wrong, they allow you to spend more money than you can afford to pay back.
In other cases, circumstances change; you might have been made redundant or your income might have dropped for other reasons. A long illness, a new baby, paying for a funeral for a loved one, business costs; any of these things could change your personal finances and cause you to run up debts.
Whatever the reason, if you have more debts than you can afford to pay back, your existing credit agreements may need to change. A responsible debt management adviser will help you adjust your credit agreements so that you can pay back what you can afford. It’s not about ‘getting one over’ on the lender; it’s about responding to a change in your ability to pay back what you owe.
In the UK, the law is generally on your side.
Similarly, lenders understand that peoples’ circumstances change. They know that for every hundred loans they make, one or two will not be paid back. Lenders expect it, it is one of the risks they take into account when lending money.
Lenders cannot make you pay more than you can afford.
They know that if they take you to court, the court will only ask you to pay back what you can afford. That’s why it is important to find a responsible debt management adviser who can guide you through the process of setting up a debt management plan.
Debts secured against your home
Not all debts are the same. Some are secured against your home. Getting help with this sort of debt is a priority because the fear of losing your home only makes the stress of other debts worse. When you are behind with your mortgage or rent, the key to dealing with repayments is a Debt Management Plan. A good debt adviser will provide you with a Debt Management Plan for free.
A good debt adviser will be able to deal with all your creditors. It’s a complicated process but most people will end up paying down their debts at a rate they can afford.
A responsible debt management solution will leave you debt-free in the long run and able to keep up with your ordinary living expenses in the meantime.
Most lenders will understand that it is better for them to get part of the debt back than nothing at all. Their aim is the same as yours, to see the debt come down.
To help you do this, some lenders will agree not to go on adding interest charges or late payment fees.
Again, a responsible debt management service will be best placed to make this happen for you.
Other Solutions
There are other solutions for people with debts that they cannot afford. Both are complex and you should always seek advice from a qualified debt management adviser. A good debt management adviser will not recommend either of these solutions for most people but they will consider using them in some cases.
Individual Voluntary Arrangement (IVA)
An IVA is a formal repayment proposal organised by an Insolvency Practitioner lasting for up to 5 years. If you are offered an IVA you should probably seek a second opinion.
Bankruptcy
This is the ‘sledgehammer’ of debt management. If there is no way for you to pay your debts and you have no assets then bankruptcy may be a solution but you should certainly talk to a responsible debt management expert first.
Find good advice
Whatever arrangement you make to control your debts, you should look for five things in your adviser:
Your adviser should not generally recommend an IVA or bankruptcy.
Their website should not ‘hide’ behind any organisation that pretends to be a free or impartial debt counselling service.
No reputable adviser will charge you any fees up front. They should be clear about what they charge and what they will provide.
They should operate a freephone number to keep costs down for you while they help sort out your problems.
The service that they provide must be tailor-made to your needs.
Conclusion
Once you have found a responsible debt management adviser, they will guide you through the process; budget, agreements, repayments. Let them help you, it’s their job.
The sooner you start consulting a good adviser, the sooner your debts will be under control again.
Most of the services reviewed by this website are available or may be accessed from Australia (see 