Debt Advice - Help is Available

UK consumers find it hard to meet their financial obligations, especially when it comes to late credit card payments, which generate extra fees. Even if you pay your credit card bill on the due date, your creditor may charge you with late fees or even move the due date at an earlier day without prior notice so that you are late on your payment. This is how a vicious cycle of financial distress is created.

UK Debt Statistics

According to the Money Charity, the UK debt statistics for November 2013 report outstanding personal debt of GBP 1.4 trillion, outstanding mortgage lending GBP 1.3 trillion and outstanding consumer credit GBP 159 billion. The average household debt reached GBP 6,016 (excluding mortgages) and GBP 54,128 (including mortgages). Finally, average consumer borrowing (including credit cards, overdrafts, and other unsecured loans) reached GBP 3,167.

Lower your debt

There are certain ways to lower your debt. One solution is debt consolidation, which combines several unsecured debts into a new loan with lower interest rate and lower monthly repayment. Just make sure not to take out the new loan for a long period because you may end up paying a higher interest and you will be required to put your house as a collateral to secure your debt. Alternatively, you can rebalance your debt by switching your credit card debt to a new credit card with a lower interest rate.

Get a Debt Relief Order

A debt relief order (DRO) is a great way to lower your debt provided you qualify for it.

To be eligible for a DRO you should prove your inability to meet your debt obligations, not own a property, have less than GBP 50 left each month after covering your fixed expenses, not filed for a bankruptcy or received a DRO in the last six years and have lived, had a property or worked in the UK in the last years. Additionally, your debt should not exceed GBP 15,000 on credit cards, overdrafts, utility bills, and business debts, your assets should have a maximum value of GPB 300 and your car should have a maximum value of GPB 1,000.

If you are approved to receive a debt relief order, you don't have to make any payments towards your existing loans and credit card debt and after a year, which is the typical DRO period, your debt will be written off, but you will be required to pay for any debt that is not originally included in the DRO.

Get a Debt Management Plan

With a Debt Management Plan you make regular payments to a settlement company, licensed by the Financial Conduct Authority (FCA), which undertakes the responsibility to pay off your debt to your creditors. You can decide the level of monthly payments you can afford to make depending on your assets, monthly income, overall debt and creditors. Keep in mind that your creditors may not agree on the debt management plan, if they think you are not eligible for it.

What to Look for in a Debt Relief Program

Debt relief programs aim to assist you to meet your minimum monthly payments through debt settlement or debt consolidation. Debt settlement is probably the best solution given that by negotiating up to 60 percent of your debt with your creditors, you will be able to pay off your entire debt in due time. Instead, with debt consolidation you will have lower monthly payments, but your debt will be transferred to a new creditor and your credit record will be affected.

Make sure to work with a licensed settlement company that offers a wide selection of debt relief options, and has a proper fee policy. There are many scam settlement companies, which charge high fees for their services, but offer no service at all.

In conclusion, settling your debt requires thorough consideration of the various options to make sure you will choose the solution that meets your needs. Ask friends and family who have worked with a settlement company. Evaluate as accurately as possible the impact of debt settlement on your credit score. Take proper steps to avoid finding yourself in a worse situation than before actually settling your debt.

Resources

Find Debt Advice Services
The Money Charity
Debt Relief Orders
Debt Management Plans