Accounting For You
Accounting and Bookkeeping for Small Businesses and Sole Traders
Chartered Management Accountant, Certified Practising Accountant
and Registered Tax Agent
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Debt Management - Personal
Posted on 24 August, 2014 at 23:40 |
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It is not
being in debt that is an issue. Most people are probably in debt at some point
in their lives, not least due to having mortgages. No, the issue is when you fall
into financial difficulty and can’t manage your debt repayments. Now while
some people may have caused their own financial difficulties, by taking on more
debt that they can afford to manage (often because they have been enticed by
easy access to credit cards, or interest free purchase) a lot of people fall
into problems through no fault of their own. There may well have been a change
of circumstance that has caused the problem, e.g. loss of employment, or a
marriage breakdown. Whatever
the reason that someone has fallen into trouble with regard to their debt
repayments, the absolute worst thing that someone can do is to ignore the
situation. This is one time when burying your head in the sand is a really bad
idea. Ignoring problems with debt will only make matters worse. If you
ignore debt problems, things tend to spiral out of control:
It is
therefore important to act as soon as you realise you may not be able to meet
repayments:
Hardship Provision
If your
debt is related to a credit contract, you can apply to the lender for hardship
provision. It is a legal requirement for lenders under the Credit Contracts and
Consumer Finance Act (CCCFA) to consider applications for hardship provisions.
If you can come to such an arrangement with your lender, this may mean that you
can pay off the debt in smaller amounts, or take a 'repayment holiday' until
you are able to afford the full payments again.
In order to
apply for the hardship provision, you will have to:
You can
apply if your hardship has been caused by illness, injury, loss of employment,
or the end of a relationship.
Debt Consolidation
A debt
consolidation loan is one new loan that covers all your debts. This would mean
that all your individual creditors were paid off and instead you owed money, with
just one lot of interest charges, to one financial provider. Debt consolidation
loans are offered by most banks and other financial lenders.
If you are
considering consolidating your debts, you should:
Budget / Debt Advisor
These days
there are several different organisations and agencies who will help you to
manage getting your debt under control. They will generally work with you to
draw up a suitable repayment plan and will usually negotiate with your
creditors on your behalf, not only to plan a repayment schedule but also often
to get further interest charges either reduced or suspended.
Some of
these organisations will even put together a system whereby you make one
payment to them per month and they then pay your individual creditors on your
behalf, making it much easier for you to stay on top of your repayment
schedule.
Creditors
are generally very open towards working with these organisations as they know
it means that they have a good chance of getting their money back, the
organisations having already achieved a good track record with them. Some
of the organisations who specialise in helping people with debt are as follows: |
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