Advice and Contacts
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An article published in the Times this week has caused widespread controversy. Purporting to contain a ‘20 point guide to staying in control of your loans’, it actually contained a large amount of utter drivel. Debate has raged about how many of the points (if any) were actually good advice, while others are thought to be easy means of going bankrupt.
Unlike the deeply cynical who have piled into the argument, I have pulled 5 of the 20 points out of the mire and washed them down to be presented here. Some may seem like stating the obvious but as the growing extent of Britain’s debt crisis testifies, these lessons still need to be learnt.
Firstly, watch for warning signs. Things are most worrying for the 1.4 million households that are due to come off low-price fixed-rate loans this year. But you should also be concerned if you are on a downward spiral of paying back less and less of your borrowings each month. Failing to repay your overdraft (and going up to, or exceeding, the limit regularly) is a sign of credit distress, as is taking on new borrowings, such as another credit card, without clearing the old.
Secondly, search in your finances for some extra cash. If you have suffered redundancy or are employed on short-term contracts, you may have paid too much tax under PAYE and may be due a refund. Check with Revenue & Customs. Go online to www.direct.gov.uk and check if you are getting all the benefits due to you. Check on your tax credits at www.taxcredits.inlandrevenue.gov.uk.
Thirdly, make sure you minimise your spending. You could be paying less for expensive items such as utilities. Check at a price-comparison site such as www.uswitch.com. Stop paying for insurance policies you don’t need, such as payment protection insurance (PPI) or mobile phone cover. Cancelling PPI on a £5,000 loan over three years will save £366.60 a year. The websites www.creditaction.org.uk and www.moneysavingexpert.co.uk have hundreds of money-saving ideas. Fourthly, do not be afraid to approach your lender. If your problem is short-term it may offer a payment holiday during which it will accept lower or even no payments. It may even suggest an alternative mortgage.
If you are repaying both capital and interest, switch to an interest-only loan. On a £200,000 loan, a borrower paying 6 per cent can save £289 a month this way. But be sure to begin repaying the capital again as soon as you can. Increase the term of your loan to reduce the monthly repayments due. An increase from 25 to 30 years on a £100,000 mortgage cuts £44 a month off the bill, but be warned, you will pay much more over the term of a longer loan. You may be able to take out a cheaper mortgage with another lender, although companies have tightened their lending criteria since the credit crunch so this may not be possible. Pay mortgage, council tax and utility bills before credit and store card bills. Non-payment of these important bills can bring much harsher penalties.
Lastly, never be afraid to face up to your problems. People in debt are often in denial. Do not underestimate how much you owe. Think of your partner and or children. You may be ashamed, angry, frightened and depressed, but you need to talk to them, not least because they can try to boost their income and cut their spending. You certainly need to be honest with your mortgage company. Your lender cannot be sympathetic if you have not told it. Always communicate in writing and keep copies of letters sent and received; only make offers you can afford and back this up by showing the company your budget. Tell it about every change in your circumstances. Ask the company’s advice.
One thing everyone does agree on is that at the end of the original article was a list of useful contacts for those who, having followed the original advice, was still having problems. I shall reproduce this here for referent for those who may need it.
The Consumer Credit Counselling Service www.cccs.co.uk (free helpline 0800 1381111)National Debtline www.nationaldebtline.co.uk .
