Use a debt management plan to keep control of your finances. If you are desperate to get out of debt, then this article will help you stay clear of common trip wires as you plot your way towards financial freedom.
A debt management plan helps you lower monthly payments by having a professional debt adviser negotiate with creditors on your behalf. It means you can repay debt at an affordable rate and have more money left over at the end of the month to spend on other things. A debt management plans can also result in interest rates being frozen and because it is not legally binding, it is flexible and hassle free. Clearing debt with a debt management plans (DMP) has become the number one debt solution for consumers with money problems. However, organising your finances using a simple debt plan can help you avoid the necessity of a DMP.
Make a Debt Plan – Stay on Top of Your Finances
A debt plan isn’t something you should do every year but rather every three months. Most businesses divide their financial reports into quarters so they can keep a tight reign on profit and loss – and your debt plan should be no different. Regularly checking your expenses as well as income will help you spot areas that can be improved, such as credit card interest or gym membership fees. If you were to evaluate your finances every 12 months, you increase the chances of overspending on something that could have been avoided.
Debt advice UK
Current accounts minimum deposit
Are you aware there is probably a minimum deposit requirement on your current account? Many banks offer current accounts on condition there is a minimum amount paid into it on a monthly basis. This is especially true of accounts with overdrafts, and banks will stipulate that your wages are paid directly into the account. If not your wages, then you should expect to pay in anything from a few hundred to a thousand pounds every month. If you are unsure if this applies to you, contact your bank and make enquires. If you do not meet the minimum deposit you can incur charges, lose your overdraft facility, Maestro card or suffer an interest reduction on your account. (Current accounts, however, do not generally offer interest above 1%.)
Credit cards 0% introductory offer
Most credit cards offer a 0% balance transfer across a six to 12 month period. After which, the interest rates defaults to a more competitive rate, ie 16% APR. If you have credit card debt, switching to a 0% card is a must if you can do it. Transferring your balance from your existing card to a zero interest alternative allows you to repay as much as you can within the offer period. Doing so has the potential to dramatically reduce your credit card debt. However, should you miss a payment or otherwise default, you will forfeit the 0% interest period ahead of term. Also, don’t get caught out when the interest rate defaults, be prepared and understand exactly how much you will be paying. Finally, only transfer your balance if the normal interest rate isn’t much higher than the card you are currently using. This would represent a false economy, where any short-term gains are dwarfed by long-term losses.
Credit card interest rate shuffle
You’ve applied for the credit card you saw advertised online or in your favourite newspaper because the low interest rate seemed like a good deal that would save you money. However, you may get the card you applied for but not at the advertised interest rate. Credit card companies use a thing called ‘risk based pricing’ to assess how safe their credit will be in your hands. Unless you have a gleaming credit record and a solid loan history chances are you will not be eligible for the advertised interest rate. In short, risk based pricing means different people get different deals.
Insurance – to claim or not to claim?
Insurance policies almost always come with a ‘excess’ rule attached. Should you wish to claim loss or damage on your house insurance, the excess amount may be detrimental to your claim. For instance, say the excess on your house insurance is £300 and you wish to claim £500, you stand to receive just £200. Furthermore, as a result of making a claim your premiums will increase the following year making your home insurance policy more expensive. For anyone concerned about debt management, this could be an unnecessary loss of money.
If you would like to get out of debt by lowering monthly loan repayments, find out how a debt management plan can help you. Alternatively you can call our free advice line on 0800 014 7863
Ideally suited to debts of less than £5k with some disposable income available. Learn how to consolidate your situation and reduce your monthly payments by learning to negotiate with your creditors directly.
Designed for debts of up to £15k where creditor pressure is becoming too much to handle and you may have failed to agree to an overall acceptable monthly payment with your creditors directly.
Minimum total Debt of £15k to qualify for an IVA. Typically you can write off up to 75% of your debts and repay the balance over 5 years. This is a formal arrangement and failure to maintain it can have serious implications
If you have been refused an IVA or simply do not have any disposable income to come to an arrangement with your creditors Bankruptcy may well be your best option but professional help and advice is strongly recommended before entering into any formal arrangements.