Get rid of those smoking debts
Overstretched yourself? Melanie Bien shows how to put your finances in order
Sunday 19 August 2001
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).
Compare with the Independent: See how much you could save by switching credit cards. Compare now
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Orgasm machine to deliver climax at the push of a button
- 3 Dear 'The Sun', breast cancer isn't sexy
- 4 Teacher shows sex tape featuring herself to pupils during class by mistake
- 5 Singapore sting: Sky-high prices are pushing locals to the edge of affordability
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
Exclusive: Impact of immigrants on British workers ‘negligible’
Vince Cable: Teachers 'know absolutely nothing' about the world of work
Ukraine crisis: Russia pledges to 'retaliate against sanctions' as Ukrainian president says Crimea vote will not be recognised
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew