Past Articles for January, 2008

Now is an ideal opportunity for people to lower their levels of credit card debt, it has been suggested.

According to Moneyfacts.co.uk, January is the time of year when people are facing up to their borrowing during the festive season.

The firm claimed: “In the last couple of weeks thousands of people will have taken a sharp intake of breath when they realised the extent of their Christmas overspending as their latest credit card bills hit the doormat.”

Moneyfacts.co.uk claimed that in an attempt to become debt free people should also consider switching suppliers of personal finance products.

Earlier this month, Rachel Thrussell, head of savings at the institution, reported that it is vital consumers keep an eye on the rate of interest they receive on their savings account and ensure that they change providers in an attempt to get a good deal.

She suggested that those who do fail to do so could be missing out on hundreds of pounds every year.

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Consumers should think carefully about the credit products they use when attempting to become debt free, an expert warns.

Mark Oliver, lead officer for Cambridgeshire county council trading standards, explains that some apparent solutions can actually present new problems.

His advice on becoming debt free includes a warning that loan sharks are not subject to the provisions of the Consumer Credit Act.

As such, anyone borrowing funds from an unlicensed moneylender would not be protected by the law, he says.

Mr Oliver comments: “As the credit card bills arrive, people may start to feel the effects of missed payments.

“We all sometimes end up spending far more than we ever meant to but please think carefully about who you borrow money from.”

The government’s Directgov online advice service echoes the caution to Britons attempting to clear their Christmas borrowing.

Advice on becoming debt free given by the site includes the observation that loan sharks often charge high rates of interest and may resort to violence if payments are missed.

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One Citizens Advice Bureau has reported a massive surge in the number of queries from people seeking debt help.

Anne Bowen, manager of the Dorchester and district branch, made her comments to the Dorset Daily Echo, expressing concern that 2008 could be as bad “or even worse” than last year.

Levels of problem debt could be the result of Christmas overspending but also following issues such as ill health or redundancy, she explained.

“People also panic when they get into debt and they don’t tell anyone else in the family. Most situations are retrievable - for even the largest sums there are options,” Ms Bowen continued.

She urged those with problematic levels of borrowing to seek advice on becoming debt free.

The government advises anyone facing problem debt to take action as soon as possible and ignore the problem as it will become worse.

It suggests there are a number of routes out of debt which allow people to avoid bankruptcy, such as individual voluntary arrangements, a consolidation loan or debt management plan.

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One Citizens Advice Bureau has reported a massive surge in the number of queries from people seeking debt help.

Anne Bowen, manager of the Dorchester and district branch, made her comments to the Dorset Daily Echo, expressing concern that 2008 could be as bad “or even worse” than last year.

Levels of problem debt could be the result of Christmas overspending but also following issues such as ill health or redundancy, she explained.

“People also panic when they get into debt and they don’t tell anyone else in the family. Most situations are retrievable - for even the largest sums there are options,” Ms Bowen continued.

She urged those with problematic levels of borrowing to seek advice on becoming debt free.

The government advises anyone facing problem debt to take action as soon as possible rather than ignore the issue, as it will become worse.

It suggests there are a number of routes out of debt which allow people to avoid bankruptcy, such as Individual Voluntary Arrangements (IVAs), a consolidation loan or debt management plan.

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Inconsistency amongst mortgage lenders regarding missed payments, could result in fees of up to £50, according to a survey by moneysupermarket.com.

Those already in debt could be interested to know that the fees range from £50, charged by GMAC, to HSBC who charge nothing for missed payments or clear debt
counselling.

Some banks charged extra money for falling into arrears with mortgage payments, or when a direct debit or cheque is returned.

Head of mortgages at moneysupermarket.com Louise Cuming warned: “I’m sure customers in arrears are unaware that most lenders charge for every call they make and letter they send.”

Consumers who have missed payments and found debt spiralling because of the confusing range of fees should seek debt advice and could consider an Individual Voluntary Arrangement (IVA) for severe debt problems.

Research by uswitch.com has shown that customers in the UK could save £15 billion through debt consolidation, with tools such as IVAs.

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The current financial market could have “implications” for those in debt during 2008, warns the Financial Services Authority (FSA).

The FSA has published its Financial Risk Outlook, which warns that the current economic climate could pose problems for those with high levels of borrowing, suggesting that those with problems should seek debt help.

Callum McCarthy, chairman of the FSA, said: “Firms and consumers need to recognise there are both short and long-term risks and should think about the implications.”

The report also warned that there could be reduced confidence in the security of financial institutions, highlighting the importance of becoming debt free as soon as possible.

A survey by MoneyExpert.com shows that one in ten adults in debt are concerned about their debt management abilities, suggesting that up to 3.4 million borrowers may find their finances get out of control.

It was also indicated that seven per cent of those with debts are “very concerned” about their situation.

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Around 11 per cent of those with credit card debt missed month payments in the second half of 2007, according to research by MoneyExpert.com.

The figures amount to over five million people who need debt help, as late payments can result in late payment fees of around £12.

Sean Gardner, chief executive of MoneyExpert.com explains the consequences of not seeking debt advice in time: “The effect of a payment can last as long as three years on your credit file and it will be used by firms to decide whether they’re going to lend you cash and what they’re going to charge.”

It was also noted that there were regional differences, as 15 per cent of credit card holders in London had missed a payment, compared to nine per cent of those living in the north of England.

CallCredit has issued guidelines for those seeking debt management help, with advice such as sorting out finances straight away and creating, and sticking to, a monthly budget.

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Those with credit card debt could be affected as banks reduce spending limits for some customers, according to Fool.co.uk.

The finance website reports that 12 per cent of credit card holders have had their limits reduced by an average of seven per cent, indicating those in debt should take action.

However, it is claimed those aged between 18 and 25 years old are three times more likely to be given an extension on their credit card, which could make debt management harder.

Head of personal finance at Fool.co.uk David Kuo explains this could send a confusing message to those looking for debt help.

“There are indications that lenders are pulling down the shutters for some customers, and holding the door open wide for others,” said Mr Kuo, adding: “What banks give with one hand they can easily take away with the other.”

The effects of reduced spending power could affect families but Engage research shows that 88 per cent of those in a relationship would cut back on their own spending so their partner could continue to be “kept in the manner to which they are accustomed”.

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British consumers around the country are facing up to the reality of their personal finance and debt management realities in the early part of this year, it has been claimed.

According to the assessment of Richard Watters from the property purchasing company A Quick Sale, January is a particularly harsh time of year for consumers who overspend during the festive season.

Furthermore, Mr Watters has suggested that becoming debt free will become an increasingly urgent priority for consumers around the country as they come to reassess their finances in the new year.

“Our advice to people for whom the extra debt amassed over Christmas was the last straw is to seek professional advice sooner rather than later,” he said.

“For many people on the verge of arrears, re-assessing finances and looking at monthly outgoings can help to get them back on track.”

Citizens Advice claimed recently that the subprime mortgage sector has undermined home ownership in many parts of the UK.

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Many families in the UK are not in a strong enough financial position to face the economic squeeze that is set to come in 2008, according to one MP.

Phillip Hammond, a treasury spokesperson for the Conservative Party, has claimed that prime minister Gordon Brown’s mishandling of the economy has left British households facing serious financial problems.

With millions of people already struggling with debt management problems, a recent report from Capital Economics has shown that energy prices look set to rise considerably faster than real household incomes this year.

“A hike of nearly £200 on household bills means yet more pain for families who are already feeling the pinch from higher mortgage costs and soaring food prices,” said Mr Hammond.

“Gordon Brown’s economic incompetence has left Britain ill prepared to cope with a squeeze like this. It is ordinary families who will be left to pick up the pieces.”

Including mortgage arrears, the average household debt management burden amounts to more than £56,000 in the UK, according to the latest figures from the Credit Action charity.

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