Get rid of those smoking debts

Overstretched yourself? Melanie Bien shows how to put your finances in order

Too any of us are too impatient to save up for what we want, be it a new stereo, holiday or car. Instead, we would rather "buy now, pay later" using credit cards, personal loans, overdrafts or other finance deals, such as hire purchase. And even when it is time to pay up, full repayment can be quite easily deferred for months on end, as long as you cough up the interest.

Given this trend, it is no surprise that people are increasingly finding themselves in the red. According to Bank of England figures, Britons are in debt to the tune of £691.5bn, including mortgages, bank loans, credit cards and HP. Adverts for debt management companies, such as Baines & Ernst and Gregory Pennington, have proliferated in recent months – but there are better ways to manage your debt.

"Many people don't realise when they employ the services of a debt management company that they still owe money to the individual creditors," says Julie Moulsdale at Direct Line, which offers personal loans. "All they are doing, in effect, is slapping another charge on top – usually a 15 per cent management fee – so, in effect, adding to their debts."

Royal Bank of Scotland, Abbey National and Alliance & Leicester are calling on the Office of Fair Trading to make guidelines stricter and warnings on adverts mandatory. Debt management companies do not take over the liability for your debt; any legal action by your creditors will still be taken against you personally. In other words, the debts are still there and they are not being consolidated into one loan, although you will make only one payment each month to the debt management company.

All the debt management company does is rearrange the loan terms with your creditors and charge you for doing this. Some debt management companies also take a monthly commission from every payment you make to them, so you could find yourself even worse off.

If you get into financial difficulties, the first step is to see whether you can work out a repayment solution on your own. Most people should be able to do this unless they have very severe debt problems.

Calculate your net income and outgoings and see how much is left to pay off your debts. You need to deal with priority debts first – those which, if left unpaid, would have serious repercussions. These could include, for example, mortgage repayments and utility bills.

The next step is to get in touch with your creditors and ask if they would be prepared to accept smaller payments over a longer period. Most lenders should be able to come to an arrangement with you.

If you fall into arrears without speaking to your lender, or simply cancel a direct debit, legal action may be taken to recover what you owe. For this reason, you should inform your creditor as soon as you know you are going to have difficulty making a repayment. The temptation is to do nothing and hope the problem will go away, but this inevitably makes things worse.

If you really need help prioritising your debts, contact a Money Advice Centre, Citizens Advice Bureau or national counselling agency rather than a debt management company. These organisations provide free advice and assistance to those in financial difficulties.

Contacts: see your telephone directory for details of your nearest Citizens Advice Bureau, Money Advice Centre or Law Centre. To find a personal adviser near you, call the Money Advice Association (01476 594970, England and Wales only). In Scotland, call Money Advice Scotland (0141 572 0237). The National Debt Line is on 0808 808 4000 (Mon and Thurs, 10am-4pm; Tues and Wed, 10am-7pm; Fri, 10am-12pm).

News
A Brazilian wandering spider
news

World's most lethal spider found under a bunch of bananas

News
people
Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
Voices
Sol Campbell near his home in Chelsea
voices
PROMOTED VIDEO
News
i100
News
Kimi the fox cub
newsBurberry under fire from animal rights group - and their star, Kimi
Sport
Fans of Palmeiras looks dejected during the match between Palmeiras and Santos
footballPalmeiras fan killed trying to 'ambush' bus full of opposition supporters
Arts and Entertainment
filmsIt's nearly a wrap on Star Wars: Episode 7, producer reveals
Life and Style
fashion
News
i100
News
<p>Jonathan Ross</p>
<p>Jonathan Ross (or Wossy, as he’s affectionately known) has been on television and radio for an extraordinarily long time, working on a seat in the pantheon of British presenters. Hosting Friday Night with Jonathan Ross for nine years, Ross has been in everything from the video game Fable to Phineas and Ferb. So it’s probably not so surprising that Ross studied at Southampton College of Art (since rebranded Southampton Solent), a university known nowadays for its media production courses.</p>
<p>However, after leaving Solent, Ross studied History at the School of Slavonic and East European Studies, now part of the UCL, a move that was somewhat out of keeping with the rest of his career. Ross was made a fellow of the school in 2006 in recognition of his services to broadcasting.</p>
TV

Rumours that the star wants to move on to pastures new

News
i100
Arts and Entertainment
The cast of Downton Abbey indulge in some racing at a Point to Point
tvNew pictures promise a day at the races and a loved-up Lady Rose
News
people

Comedian says he 'never laughed as hard as I have writing with Rik'

Arts and Entertainment
Tim Wonnacott dancing the pasadoble
TVStrictly Come Dancing The Result
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Project Coordinator - 12 month contract

    £27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

    IT Operations Manager - London - £55,000

    £50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...

    Banking Solicitor NQ+

    Highly Attractive Salary : Austen Lloyd: NOTTINGHAM - BRILLIANT FIRM - You wil...

    Day In a Page

    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
    Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

    How We Met: Hugh Bonneville & Peter James

    'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
    Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

    Bill Granger's heavenly crab recipes

    Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
    Radamel Falcao: How faith and love drive the Colombian to glory

    Radamel Falcao: How faith and love drive the Colombian to glory

    After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
    Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

    Terry Venables column

    Premier League managers must not be allowed to dictate who plays and who does not play for England
    The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

    Michael Calvin's Inside Word

    Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past