Monthly Archives: July 2011

Payday Loans Thought To Be The Main Reason Behind Low Income Debt

Payday Loans Thought To Be The Main Reason Behind Low Income Debt

Payday loans and short term loans are thought to be the main reason behind low income consumers being faced with spiralling debt problems.

Debt experts are suggesting that payday loans are the primary cause for lower income consumers facing mounting debts.

Due to the inflexibility of some mainstream lenders, most notably banks as a result of the UK economic recession, people on low incomes are having to turn to payday loans to help ease “their financial burdens.”

In many cases short term loans such as payday loans and doorstep loans can help to illeviate the financial pressure on British people. However, those on low incomes are urged to be cautious when opting for a quick, short term solution to brige the gap until payday.

One debt expert commented:

“If the problem is unsecured debt that has become unmanageable then it’s important that people who are struggling to meet their repayments seek help.”

He added that people on low incomes should look into what state benefits they could be entitled to, it could mean the difference between mounting debt and the ability to face those monthly costs until payday.

Should payday loan debt get out of control consumers are urged to consider debt management plans to help ease the debt by consolidating the debt so the consumer repays the amount in easy, manageable chunks.

Free money services such as the Money Advisory Service and the Consumer Credit Counselling Service may be worth talking to if you’re after help in controlling personal debt.

Creditwindow urge any consumers to be careful when seeking credit cards, personal loans or any type of financial borrowing. Anyone looking for a loan or credit card should do some thorough research before applying for them. Creditwindow boasts a number of guides, news and features that deliver impartial advice on financial lending.

To find out more please feel free to check out any of the main categories on this site, it’s worth knowing what your options are and the differences between the loans and credit cards.

Growing unsecured loan debt raises serious concerns

The Consumer credit service have expressed concerns over low income families gathering excessive amounts of unsecured loan and credit card debt.

The Consumer credit service have expressed concerns over low income families gathering excessive amounts of unsecured loan and credit card debt.

The Consumer Credit Counselling Service (CCCS) has revealed that the high levels of unsecured personal loan debt and credit card debt, held by people on low incomes, are of major concern.

The CCCS reported that, on average, someone with an annual income of under £13,500 has unsecured loan or credit card debt of £12,870, raising some real concerns for vulnerable borrowers.

The report also suggests that, of this group, the unsecured debt to income ratio is almost 200% of their annual income.

Consequently it is a lot harder for low income earners to repay credit card balances and personal loans.

Director of external affairs at CCCS, Delroy Corinaldi, commented:

“Unmanageable debt is a problem across all income groups, but those on low incomes are particularly financially vulnerable.”

Mr Corinaldi went on to add that he is also “concerned about the use of credit by many on low incomes and fear that many are using it to pay for day-to-day living expenses, which is an unhealthy use of credit.”

Using free services such as CCCS or the Money Advisory Service is strongly recommended to consumers as it can help them to manage their money better and control their borrowing to avoid getting into further debt.

Consumers who are struggling with debt are advised to seek debt counselling through these services or could look to consolidate their existing debts into a debt management plan.

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Wonga and PaydayUK seek to educate UK about Payday Loans

payday loan firms educate British public about short term loans

payday loan firms educate British public about short term loans

Payday loan firms, such as Wonga and PaydayUKhave had a bad rap over the years, but do they really deserve it?

The likes of the press and politicians seem to enjoy jumping on the bandwagon when it comes to payday loans, largely because they don’t understand the industry or they simply refuse to acknowledge that they might be wrong.

Fortunately payday lenders such as Wonga and PaydayUK have done quite a lot in recent years in an attempt to educate the British public about the nature of these short term loans.

These quick payday loans are essentially act as a payday gap and are especially useful if you receive an unexpected bill or have simply overspent that month.

As long as you pay the loan back in time there is no reason why a payday loan wouldn’t be the right solution for you.

Whilst the APR (annual percentage rate) of the loan appears astronomical it’s not really representative of the what you actually pay back. Let’s be realistic for a minute – an APR is an interest measurement over a year, not over a month – the length of time you borrow the payday loan for.

In essence you only end up paying an additional £20 – £25 in interest rates on top of the loan. For example, if you borrow £100 then you pay back £125, not really a major amount of interest. The interest only builds up if you don’t repay the loan quickly enough.

If you’re looking for a quick, short term loan then it might be worthwhile – compare our range of payday loan lenders and see if you can find the right one for you.

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When a Scottish Trust Deed Might Help With Debts

When a Scottish Trust Deed Might Help With Debts

Guest blogger Simon Wyllie suggests that Scottish Trust Deeds could help get you out of debt.

As households throughout the UK come under increasing financial pressure, it’s unsurprising that an entire industry has developed which advertises solutions to deal with unmanageable personal debt.

Many people remain unaware however that where you live in the UK determines which options are available to you.  Residents of Scotland have access to a variety of measures to deal with debt difficulties that are unavailable in the rest of the UK.

A trust deed (often also referred to as a “protected trust deed” or a “Scottish trust deed”) is one such option. Trust deeds exist as an alternative to bankruptcy for residents of Scotland suffering from serious debt problems.

The marketing of trust deeds has caused some issues. Certain debt-help providers advertise them as being an easy way to escape from debt and to have much of it legally written-off. This view downplays the serious nature of a trust deed; it is a formal insolvency measure in many ways similar to bankruptcy and it should always be viewed as a last resort.

However, for anyone with serious debts that simply cannot be repaid within a realistic timeframe by other means, a trust deed might well be appropriate.

When signing a trust deed you appoint a “Trustee” to supervise your financial affairs for a fixed period (which is often three years). You commit to paying over your surplus income each month and also to paying over the value of any significant assets that you currently own (or may acquire during the trust deed term).

Due to the requirements connected to assets, homeowners should be cautious about their position prior to signing a trust deed. If they have equity in their home they will need to pay over the value of that equity. However, refinancing during a trust deed to release equity is currently virtually impossible. This may mean that some homeowners with equity may have to review other options to deal with their debts.

The technical nature of the trust deed process and trust deed guidance/legislation means that many people have questions that they need answering before they are prepared to go ahead with this debt solution option. In such circumstances making use of a trust deed forum might be appropriate as it enables the provision of expert trust deed advice alongside the shared personal experiences of individuals that are at various stages of the trust deed process.

Guest Blogger:

Simon Wyllie

Trust-Deed.co.uk

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IVA Advice Options Explained

IVA Advice Options Explained

Guest Blogger, Simon Wyllie, explains IVA advice options for consumers struggling with debt.

After a short period of decline, it’s apparent that adults throughout the UK are once again building up their personal debts. A few years ago this was often to fund luxuries such as new cars or foreign holidays. During the current economic squeeze the evidence is that many adults are using credit just to survive financially, with debt often being used to finance essentials such as a mortgage, rent or food.

Inevitably a growing level of debt will leave some people in a position where the repayments become unaffordable. This often occurs due to an unexpected change in circumstances and separation, redundancy or another form of income loss may be the root of the problem.

For residents of England, Wales and Northern Ireland an IVA (Individual Voluntary Arrangement) is one of the options to bring uncontrollable debt repayments back under control. Choosing where to obtain IVA advice is however not always easy.

For good reasons many people like to approach trusted organisations such as the Citizens Advice Bureau when they get into financial difficulty. The advisers at the CAB may well be able to provide good IVA advice as well as to direct people towards other viable options. However it should be remembered that the CAB isn’t itself a provider of IVA service so may not be able to provide full detail on the intricacies of an IVA.

IVA advice is also on offer from most Insolvency Practitioners. An Insolvency Practitioner is the individual that actually takes a “personal appointment” to handle an IVA for someone who wishes go ahead. It’s suggested that anyone seeking IVA advice focuses their search on Insolvency Practitioners that specialise in personal IVA services as opposed to the other main area of insolvency work which is “business recovery”.

Many IVA intermediaries also exist and are often connected to websites that appear to be direct providers of IVA services. They will eventually sell your “case” to an Insolvency Practitioner who will deliver the actual service. It’s strongly suggested that nobody should pay any kind of an upfront fee to any of these IVA intermediaries.

As IVA advice is a very technical area, rooted in insolvency law, many people have a lot of questions that they’d like answered

before proceeding with an IVA. In such circumstances an IVA forum may be useful. An IVA forum allows information to be gleaned from IVA experts as well as the exchange of personal experience between people dealing with similar debt situations.

Guest Blogger:

Simon Wyllie

IVAAdviceForum.co.uk

Get yourself help with Creditwindow's debt management programmes.

A Debt Management Plan: Choose Carefully

A Debt Management Plan: Choose Carefully

A Debt Management Plan: Choose Carefully

Debt management plan companies have been under serious scrutiny in recent times. The media, regulators and politicians have all taken an interest in an industry that has sometimes promised too much and delivered too little.

The reality is that a debt management plan is an ideal solution for many people who otherwise could not afford to repay their debts. It’s known as being “informal” in nature and therefore potentially much less damaging to the debtor than formal insolvency measures such as bankruptcy or an IVA. With creditor support it may result in interest being frozen (or reduced) which can greatly increase the rate of repayment.

There are however huge discrepancies between the competence, ethics and customer-service offered by different debt management plan companies. Good DMP providers fulfil a valuable role on behalf of their clients, serving as an adviser and a buffer to facilitate an achievable repayment outcome. Poor DMP providers however may lead to a debt situation worsening.

Competence is of paramount importance. Many unqualified individuals have flooded into the debt management industry seeing it as a lucrative business prospect. Professional qualifications in debt advice (the Certificate in Debt Resolution for example) and insolvency are available. It’s suggested that you confirm the qualification credentials of advisers and refuse to deal further with any “adviser” that turns out to be unqualified.

The operation of good ethics is equally important. Have you been provided with information on options other than a debt management plan? Have the drawbacks of a DMP been explained to you as well as the benefits? Advice should be provided that is in your best interests; giving you the information that you need to make an informed decision is a vital part of an ethical debt advice process.

Customer-service is also very important. This can be hard to gauge when taking initial advice, so recommendations can be useful. Can anyone you know give you feedback on a DMP firm they have used? If you prefer not to discuss this subject with those you know, online debt management plan forums may provide some feedback and reviews on certain firms that will be useful to you.

Take the time to identify qualified debt management plan advisers who operate ethically (and who work within customer-focussed businesses). This will greatly improve the prospect of finding a DMP that truly benefits you financially as well as reducing any worry or stress you may have been experiencing.

 Guest Blogger:

Simon Wyllie

DebtManagementPlanForum.co.uk

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Consumers switch to debit cards over credit card transactions

British consumers are turning to cold hard cash or debit cards rather than credit cards, according to research conducted by the British Retail Consortium (BRC).

The figures suggested that credit card transactions dropped by 12.9% in a year, however, debit card transactions saw an increase of 15.8% in comparison.

The Director General for the BRC, Stephen Robertson, commented:

“Hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got. At the same time, use of credit cards has dropped sharply. Cash remains king – used for more than half of all retail payments.”

Mr Robertson went on to add that, due to more pressure on family budgets, consumers are managing their money more carefully than ever.

The BRC also heavily critisised British banks, saying that costs imposed on retailers for processing credit cards were far too high, suggesting that banks were more interested in lining their pockets than keeping shop prices down for customers.

Crisis Loans and Grant system due to get a Government overhaul

Crisis Loans and Grant system due to get a Government overhaul

Following changes to the crisis loan and grant system could payday loans be the financial answer low income families are looking for?

Could payday loan companies have the answer for people looking for an emergeny loan? Under new Government rules they just might…

According to new Government rules people applying for grants or emergency loans will be unable to make repeat claims within a year of applying.

At the moment vulnerable people, such as those on low incomes, can get cash for household goods such as cookers, sofas or other furniture and then re-apply again for the same item after 28 days.

The period is to be extended to a year to bring it in line with manufacturer guarantees covering faulty products.

Work and Pensions Minister, Steve Webb, announced changes to emergency loans and community care grants in a written statement to MPs. He said that the Public Accounts Committee had suggested that more needs to be done to prevent abuse of the scheme.

Unfortunately this could make things very difficult for struggling families and people on low incomes, however, payday loans or other short term loan products could be the solution.

Payday loans are essentially 1 month loans between £80 – £1,000 that are then repaid on your payday. As a short term solution, as long as they’re paid off quickly, they could really help low income families out in an emergency.

A spokeswoman for the Department for Work and Pensions thinks otherwise, saying that the changes were aimed at restoring common sense to the system, adding:

“People will still be able to claim for the same items in exceptional circumstances, and will still be able to claim for different items if necessary.”

Only time will tell if this really is the case…

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