Past Articles for the Debt Management Category

Life insurance can protect against mortgage arrears and other debt management problems that may arise from a sudden lack of income, but many people are shunning cover because they believe it is too expensive, a poll has found.

Figures from YouGov, released by Legal & General, found 65 per cent of people over-estimated the price of £150,000 worth of life cover.

A healthy, non-smoking man aged 25 can expect to find life insurance for £8 per month, according to the financial services company.

However, of the people polled, 22 per cent thought it would cost over £30 and 18 per cent believed they could pay between £21 and £30. A quarter (24 per cent) expected to pay between £11 and £20.

Commercial director for housing at the company Karen Blatchford said life insurance cover can cost as little as £6 a month yet only 38 per cent of people surveyed have cover.

She added: “People may wish to consider covering not just their mortgage debt, but their family expenditure and bills.

“Most families would really struggle if there was an unexpected drop in the household income.”

According to National Statistics, 3.06 million working-age households are not in work.

By Morwenna Kearns

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The credit crunch is not putting off British consumers when it comes to holidays abroad, a poll has indicated.

A survey of members of the public in Leeds city centre found 75 per cent were not planning on changing their holiday plans due to economic restrictions.

Just under a fifth (18.75 per cent) said the crunch had affected their plans, however – and comments made by respondents suggest the issue has been of some concern.

Sylvia Evans, aged 62, said: “It did make me think twice, but didn’t actually put me off”.

Meanwhile, John Henderson, 22, said: “It hasn’t put me off this year, but I think it might next year.”

Recent research by Kayak implied that people are making sacrifices to pay for holidays while remaining debt free.

A survey by the travel website this summer found 98 per cent of respondents were willing to cut out luxuries to pay for a holiday, while over three quarters (76 per cent) said they were already putting money aside for a trip.

By Morwenna Kearns

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More people are arranging a debt management plan (DMPs), making them the most popular option for those who wish to clear debt, a counselling service has reported.

The Consumer Credit Counselling Service (CCCS) said in the second quarter of 2008, there have been 50 times more DMPs arranged than Individual Voluntary Arrangements (IVAs), another solution to debt problems.

DMPs differ to IVAs in that they are not legally binding and the entirety of the debt must be repaid. People with more severe debt management problems may opt for an IVA which can write off some personal debt.

The charity’s report also indicated creditors are comfortable with IVAs, with 100 per cent of IVAs proposed accepted by those owed money.

For people with debts that cannot be paid back at all, bankruptcy may be an option. However, according to ClearDebt – which can help with DMPs, IVAs and bankruptcy – it “is often the last resort and is usually applied when no meaningful alternative can be offered to creditors”.

By Morwenna Kearns

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A new poll has found the credit crunch has adversely affected over half the British population in the past year, suggesting people may be struggling to clear debt.

The survey, carried out in Leeds city centre, revealed over 53 per cent felt they were worse off financially than 12 months ago.

According to one respondent, Jean, aged 44, she is worse off now because her salary has not increased at the same rate as inflation – a situation many other people may find themselves in.

Findings also showed nearly 27 per cent felt no real difference and over 19 per cent believed they were better off.

Caroline, aged 31, said she was worse off, but blamed a new job rather than the credit crunch, but said: “I’ve noticed that things like drinks, bread and milk have all gone up.”

Jawad, 29, a doctor, said his new job has meant he is not feeling the effects, but added: “If I had a different job then I’m sure it would be a different matter.”

According to the Office for National Statistics, the price of meat, bread, vegetables and cereals rose between June and July.

By Morwenna Kearns

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Comparison service uSwitch has revealed the cost to consumers following E.ON’s announcement that it will increase prices.

According to the service, from the beginning of the year E.ON dual fuel customers have seen a 42 per cent rise in bills. British Gas and EDF Energy have also put prices up this year.

Director of consumer policy at uSwitch, Ann Robinson, said: “Soaring energy bills pose a huge threat to our standard of living - gas and electricity are essential commodities which have now become a luxury that many can no longer afford.”

However, for those worried about staying debt free amid the rising costs of everyday necessities, Friends of the Earth (FOE) has said going green may save money.

According to a spokesperson, households could save “hundreds of pounds every year” by updating boilers, fitting improved insulation and not using the car as frequently.

Consumers do not need to “feel helpless” she added.

For people who do find themselves in debt, products and debt help are available.

By Morwenna Kearns

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Holidays are still big business despite the credit crunch, with around £81 billion spent on trips away by UK adults every year, according to Abbey.

For people worried about building up debts by spending on holidays, a top up card may help vacationers stay debt free.

Top up cards are used in the same way as debit cards, in that they are protected by chip and PIN and can be used to shop online.

However, because they are loaded with a set amount of cash rather than being linked to bank accounts – similar to a pay-as-you-go mobile phone – shoppers do not have to worry about accidentally going into their overdrafts.

Furthermore, they can be used like credit cards without the worry of credit card debt.

Carl Scheible, managing director of PayPal UK, which offers a top up card, said they are also “safer and more convenient” than cash or traveller’s cheques while on holiday.

“By loading up a set amount of money people can ensure that they stick to a tight budget for the duration of their holiday; avoiding the headache of a huge credit card bill when they return,” he explained.

By Morwenna Kearns

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While many people are concerned about staying debt free, over a quarter of British people may be risking debt problems by spending spare cash on holidays rather than saving it.

According to research from Abbey Savings, 26 per cent of respondents believed a trip away was the best way to spend excess cash.

In total, 62 per cent of the population use their savings for holidays – equating to £50.4 billion. The bank estimates this is losing savers £32.2 billion in interest if money is taken from high-interest accounts.

Reza Attar-Zadeh, director of savings and investments at Abbey, said consumers should take advantage of “excellent” interest rates available and put cash away – advice which could help prevent debt in the future.

“If people cut back a small proportion of the amount they spent on holidays and kept their savings, this would make a real difference to their financial wellbeing.”

In other news, this week Abbey has also urged parents to protect their homes against damage caused by toddlers.

By Morwenna Kearns

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One of the keys to debt management and staying debt free is to keep an eye on income and outgoings. According to the Association of Payment Clearing Services (Apacs), online banking may be the way to do this.

Apacs spokesperson Michelle Mayer said online banking allows consumers to see what is happening in their accounts whenever they want.

“I think what it will do is give people an exact picture of where they stand, which is always a good thing if you are trying to manage your budget,” she commented.

Ms Mayer added that online banking has recently become more popular – an opinion backed up by Apacs’ statistics showing a 505 per cent increase in the last seven years. This is the next step from shopping online, she said.

Online bankers should perhaps be wary of phishing scams, however, as Apacs reported 20,000 incidents in the first half of 2008.

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The children of people approaching old age may have to shoulder the financial burden of long-term care according to a new report – a responsibility that may result in debt management issues.

Saga found “the Bank of Sons and Daughters” may have to fund parents’ care and the cost may be more than anticipated.

A tenth of adults have discussed funding for long-term care with their parents – and the figure stands at 57 per cent for those with parents over 60.

Almost half (47 per cent) of those questioned underestimated the costs they may face as well, the study showed.

Head of care funding services at the organisation, Owain Wright, said: “The cost of care is not always something people think to talk to their parents about, but it is vital to start planning as early as possible.”

He added that many people may be relying on inheritance, which may end up being spent on care bills.

In related news today, the Financial Times quoted Capital Economics this week, which said the fall in house prices is pushing older people back into work.

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People concerned about debt management issues arising from redundancy may be interested in new statistics from the Department for Work and Pensions (DWP).

The figures show a decrease in the number of people claiming Lone Parent benefits and incapacity benefits, with the total dropping by 70,000 over the 12-month period ending in February.

Additionally, employment rates went up, according to Office for National Statistics figures which compared the first two quarters of 2008.

However, those claiming Jobseeker’s Allowance also rose by 20,100.

Work and Pensions minister James Plaskitt said there were “two sides” to the statistics.

“The welcome news is that the numbers on incapacity benefits and lone parent benefit continue to fall as our reforms kick in.

“The disappointing news is the increase in unemployment,” he added, stating that 600,000 jobs are available for those who need them.

James Plaskitt is also the MP for Warwick and Leamington. He was first elected in 1997.

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