Downloadable debt help guides

Debt Help

Over the coming weeks we are going to be adding a number of more detailed debt help guides to debt matters to our website. We hope you find them useful.

The aim of these debt help guides is to help ease your path to becoming debt free. The subjects covered by ClearDebt's debt help guides will include debt management, bankruptcy, credit rating, credit repair, mortgages, loans and, in time, many others.

We are currently aiming to add two - four debt help guides each month, so do check back often.

If you have any comments on the debt help guides, or would like to suggest a subject for a guide please email us at enquiries@cleardebt.co.uk.

More information:

Guide 1 - Credit Rating
Guide 2 - Paying Utility Bills
Guide 3 - Interest only mortgages

Guide 1 - Credit Rating

Credit Rating

Credit repair is an important tool in the battle to becoming debt free - especially if debt consolidation is your preferred tool. The first step in ensuring your credit rating is right is to find out what lenders know about you, and to make sure it is accurate.

This ClearDebt credit rating guide provides:

• Information about your rights to information about your credit rating
• Contact details for the main UK credit agencies
• Sample letters you can use to get a copy of your credit report
• What can improve your credit score
• Factors that injure your credit rating

This guide may help both those who are in the early stages of debt management, considering a re-mortgage or debt consolidation loan or who have been through bankruptcy or an IVA and want to begin the process of repairing their credit rating.

You can download the credit rating guide here.

Download PDF

Guide 2 - Paying Utility Bills

This ClearDebt guide provides: • Information about the rights of people who owe money to utility companies • Information about the different legal framework for water companies • Addresses for utility watchdogs

If you have unpaid bills, gas, electricity and phone companies can disconnect you without having to go to court. But they should give you written notice that they will disconnect you.
Energy suppliers are not allowed to disconnect you, even if you have a debt:

• From 1st October to 31st March if everyone in the home is of pensionable age. Make sure your supplier knows this, by telling them when you join their Priority Services Register.
• From 1st October to 31st March if someone in the home is chronically sick or has a disability.
• If you owe a debt to a previous supplier. For example, if you changed from British Gas to Npower and owed British Gas money, British Gas are not allowed to disconnect your supply after you have changed.
• If the debt is not for the gas or electricity you have used. For example, if you bought a new boiler from your supplier but then could not afford all the payments, the supplier is not allowed to disconnect the supply to your home.
• If you have been made bankrupt, a supplier cannot disconnect for a debt that was built up before the date of the bankruptcy order.

Gas and electricity companies must take notice of customers in need and should allow you to repay what you owe over at least a year, if you can show that is all you can afford, instead of disconnecting you or fitting a pre-payment meter. Meters make energy more expensive and you run the risk of ending up without fuel if you run out, or cannot pay for, payment cards).

Who pays? The person who originally asked for the gas or electricity to be supplied is the person who has to pay the bill. Some energy companies have also demanded payment from anyone living at the house when the gas or electricity was being used, calling them 'beneficial users’. Several courts have now refused to allow companies to pursue this kind of debt. So, if you are in this situation, you may be able to stop them insisting that you must pay.

Water Bills: Debts to water companies are treated differently from other utilities. Water companies cannot disconnect you for missing payments. They can force you to pay by pursuing a 'money-only' county court claim.

Download a more detailed copy of this guide here.

Download PDF

Guide 3 - Interest only mortgages

According to the Council of Mortgage Lenders, 61,000 first-time buyers (and more than 200,000 homebuyers altogether) arranged an interest-only loan in 2005 without any repayment vehicle in place. More than one in seven first-time buyers now take out interest-only mortgages.

This guide looks at interest-only mortgages and:
• Looks at the risks
• Suggests repayment strategies

A growing problem: Interest only mortgages appear (because you don't pay off your debt until the end of the mortgage term) much less costly than repayment mortgages For example, a £100,000 interest-only loan with an annual interest rate of 5% costs £416.67 a month, roughly £2000 pa. less than its repayment equivalent.

Of course, with the interest-only option you are still going to have to find the money to repay the principal at some point. But, an interest-only home loan that isn’t backed by a plan to repay the amount you borrowed, as well as the interest is high-risk, because it relies on you making your own arrangements to repay the mortgage principal when the time comes.

Staying safe: So, how do you ensure an interest-only mortgage does not become a financial millstone:

Make the mortgage longer: By choosing the longest possible mortgage term you could reduce the monthly repayments you need to go the more secure repayment route. For example, a £100,000, 25-year, 5% repayment mortgage costs £585 a month. Over 35 years this becomes only (!) £505 a month.

Use “interest only” just to get you started: Interest only is, granted, the only way some can afford to get on the property ladder. But, if you are in the early years of a profession where earnings are likely to rise much, much higher in the future (maybe you are a trainee accountant, doctor, solicitor or barrister – or plumber?), you could opt for an interest-only mortgage now and then switch to a repayment mortgage once your income has risen.

Change when you move: Go for a repayment mortgage when you make your next house move.

Set up a monthly savings plan: If you can set aside money for a long period (at least ten years), you have a very good chance of getting more back from an investment in shares, rather than cash savings. Think about opening a share ISA and making monthly contributions to a low-cost investment such as an index-linked tracking fund. Or, start or increase your contributions to a pension and later withdraw a tax-free lump sum to pay off your mortgage.

Go 50/50: If you can't afford a £100,000 repayment loan, why not look into a £50,000 repayment loan and a £50,000 interest-only loan?

Pay more than you must, whenever you can: You could help pay off your mortgage by making regular or lump sum overpayments. This works best with flexible, offset or current account mortgages, where you won't be penalised for cutting into your debt as and when you can.

Trade down: If the worst comes to the worse, you can sell your home, pay off your loan, and use the remaining cash to buy somewhere less costly. We don’t think that will be a very attractive prospect for many – but it could be what some are forced to do.

Whatever you do, don’t cross your fingers and hope for the best: Relying on the lottery to pay off your mortgage is not an option (well, only a 14 million to one option!)

Download PDF

Links to related ClearDebt articles:

Comparison of debt options
Guide 1 - Credit Rating
Debt Advice - CCJs
Debt Advice - Interim Order
Debt Help Links
Free Debt Advice

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