Help with Debt Problems

There are number of steps you can take in order to resolve your debt problems. The first and most obvious step to take is to fully assess your financial situation in terms of incomings and outgoings. Consider things such as who you are living with – are you married or living with a partner? Are you both employed? Do you have any dependents? Are you renting, or paying off a mortgage?

Assess your income

Firstly, take a sheet of paper and draw up two columns, one listing your total monthly income of your household, and the other listing all your outgoings, starting with the most essential outgoings first, such as rent/mortgage payments, utility bills, phone bills, food – basic requirements for living. Underneath this, you should also take into consideration transport – how you get to and from work and how much this costs you on average per month.

With regard to however much money is left over, you should realistically consider how much you will be able to set aside each month to help pay off your debts. You will have to be really critical of your spending habits; new clothes, CDs, nights out and any other extras should be kept to a minimum, or ideally put on hold until your debt situation stabilises. Aim to set aside a certain amount each month for debt repayment, and then think about how you are going to pay it back.

Decide on how to pay back your debts

The three most common ways of paying off outstanding debts come in the form of consolidation loans, a debt management programme, or, for homeowners who have already paid off one mortgage, the ability to apply for a remortgage loan.

Consolidation Loans – what are they?

A debt consolidation loan is one of the most popular ways of paying off debts in the UK. A consolidation loan is a good idea if you have several debts with different creditors and being able to keep on top of multiple monthly payments, all at varying interest rates is a hassle, and expensive. Taking out one big loan to immediately pay off all of your smaller loans and then making monthly payments to one lender may work out cheaper in the long run – it is certainly much easier to pay off your debts in this way, as you can easily plan your monthly outgoings around a single payment.

There are generally two types of consolidation loan on offer, secured, and unsecured. A secure loan called so as the lender will use something of significant value, such as your house, as collateral, or 'security'. By contrast, an unsecured loan is one where the loan is not secured against anything of value, and so is a greater risk for the lender – for this reason, unsecured loans will have higher interest rates than secure ones.

With a loan of this type, repayments will take quite a chunk out of your monthly pay packet, but the benefits of having all of your debts under control will outweigh any inconvenience in the long run.

Where can I get a Consolidation Loan?

As loans of this type have become more popular in recent years, more and more banks and credit companies are specialising in consolidation loans. There are plans for all types of secured and unsecured consolidation loans, designed to suit clients of most financial brackets.

Even if you have a bad credit history, you still should be able to successfully apply for a consolidation loan, although typically, heavier interest rates apply for such clients. Taking out a consolidation loan can also improve your credit rating if you have a bad history – provided you aren't late with monthly payments, and don't default of course.

Debt Management Programmes – what are they?

A debt management programme is similar to a consolidation loan in terms of effect – all of your existing debts are covered by a single loan, which is then repayed in monthly instalments. How a debt management loan differs from a consolidation loan is that the programme is more specific to your individual situation, and are usually available to practically anyone.

These are designed for people who find themselves in chronic debt; a situation which seems impossible to get out from. If you have been refused a loan on the grounds of you being a high risk, or having a bad credit history, then you should be able to sign up for a debt management programme.

Debt advisors will speak to your creditors on your behalf and attempt to freeze or reduce the interest on your debts until a repayment plan, made out to the advisors, can be drawn up. Whilst this will see you making repayments for years, for some it is an option entirely preferable to a court appearance or having assets seized by lenders.

Where can I sign up for a Debt Management Programme?

As debt management programmes are usually reserved for people in extreme situations, there are fewer organisations who will supply this service. However, it is comparatively easy for clients to sign up for a programme. Lenders in general will want to avoid going to court over outstanding debt if at all possible, as legal proceedings cost them a lot of time and money. As most debt advisors are affiliated with lenders, you should be able to apply for a management programme should you need it – lenders will be happy to temporarily reduce or halt interest on debts owed if it means they can get their money back eventually, and avoid any legal engagements.

Remortgage Loans – what are they?

A remortgage loan is a secured loan that replaces an existing mortgage plan that is either fully or partially paid-off. Interest rates on remortgages are typically much lower than rates on standard loans, one reason why they are attractive to home owners looking to pay off other loans or credit cards debts which will have comparatively higher interest rates.

Banks and credit companies generally favour customers who are secure, i.e. have lived at the same address and held the same job position for a number of years, and have a good credit history.

If you are a homeowner with a bad history, or have changed jobs recently, you may be refused a remortgage loan, as lenders will want evidence of your ability to repay the loan over time, so if you have recently started a new job, it might be a better idea to apply for a consolidation loan which you stand a better chance of getting, than being refused a remortgage which would then adversely affect your credit history.

Where can I get a Remortgage Loan?

Usually, from your existing bank or building society, or whoever sold you your mortgage in the first place. This is a good place to start for a number of reasons. Firstly, the lender will have all your details on file already, so applications will take less time than if you approached somebody else for a deal. Secondly, as an incentive to get customers to stay, lenders may have special offers or lower interest rates reserved for existing customers – this is because the remortgage market is highly competitive, the upshot of this being that you should be able to find someone willing to sell you a remortgage plan practically anywhere.

What to do next - other ways to save money

Once you have decided on how you are going to start paying your debts off, you can start to look at other ways in which you can save money by reducing your monthly bills to make monthly debt payments less of a strain.

Turn out the lights – when you're not in a room, there's no need for lights to be left switched on, or most other things for that matter. Where you can, change your standard lightbulbs for energy savers, as these consume less power. Appliances such as TV sets left on standby also consume large amounts of electricity – you can save a considerable amount by ensuring that electronic equipment is turned off at the mains when not in use. These small changes will be reflected in your energy bill, meaning more spare cash.
Plan shopping trips – you can save petrol/bus money on food shopping trips if you can get the majority of your weekly shopping done in one trip. If you live close to a supermarket which provides an online delivery service, you can save even more time and money by completing an order online during your lunch hour at work, and timing the delivery to turn up just after you arrive home, so you don't even have to make the trip in the first place. If you're already paying for internet access at home, make the most out of it – place an order to turn up at your home the following evening.
Save money on phone calls/internet access – now more than ever, internet service providers are providing free calls or mobile minutes bundled with their high-speed broadband packages. See how much you can save by shopping around for a better broadband deal.
Cutting back on nights out – save money by staying in on a weekend – rather than renting movies out from video stores, see what titles are available at the local library – you pay for local services through tax, so get as much as you can out of them. If you don't mind clearing up in the morning, invite friends round for a party and tell them to bring drinks.
Flog your old stuff – got any old records or clothes that are embarrassing or you don't listen to/wear anymore? Make some extra cash by selling up online. Be ruthless and go through everything you own, and weigh up if you really need to keep it. If this means selling something relatively disposable, such as a CD, remember you can always re-purchase it at a later date when your finances have improved.
Re-use, recycle – don't throw away something that can be used elsewhere. Keep any sheets of paper that come from failed prints – cut up the sheets and use the unspoiled sides for notepaper. Save plastic bottles so they can be filled up again – tap water run through a filter jug is just as good as any bottled water. Some local councils run a cashback scheme for recycling tins, glass and plastic – see if you can save money this way.

Making Complaints

If you feel that you have received service which is unsatisfactory, feel that you have been unfairly charged, or want to make a general complaint, there are a few things that you should remember to ensure that your problems are dealt with as smoothly as possible.

Write first – it is usually best to put any complaints you have in writing, with the word 'complaint' printed at the top. Ensure that you include essential information such as your contact details, your name as it appears on the card, your card and account numbers, any reference numbers you may have, and the nature of your complaint, e.g. why you are unhappy with the service. Formalised complaints are usually processed faster, as any information obtained from complaints made over the phone will have to be transferred to paperwork before the problem can be dealt with – a polite and concisely-worded letter neatly side-steps this part of the process. A polite letter also looks better on your credit history than a heated exchange with a member of staff on the phone.
Enclose the relevant documents – when writing out your letter of complaint, ensure that you make legible photocopies of any paperwork which backs up your complaint, keeping the original copy for yourself. The company should have all this information on file anyway, but if you provide them with something they can use to cross-check with their files, then you have helped yourself by helping them in dealing with your complaint – you get results faster, and ensure that mistakes are kept to a minimum.
Make a note of people's names – whenever you make contact with, or are contacted by a lender or credit agency over the phone, make a note of their full name, and the time and date of when you spoke to them. As most companies that run a customer service/complaint department will record all calls, they will be able to easily find a recording of your phone conversation in their archives if you can give them the time and date of the call and the name of who you spoke to.
Move up the chain – when issuing a complaint, try to contact the person you dealt with originally. If they are unable to help you, ask to take matters further. Different companies will have different procedures for handling complaints – ask for details such as the name(s) of who is in charge of processing complaints, so if you phone up in the future you can ask to be transferred to a specific person.
Keep your cool – If you do make a complaint over the phone, remember to keep your cool. No matter how angry or upset you are with a company, try to remain calm. Customer service staff have the right to terminate a call if you swear, use abusive language or raise your voice – meaning you will have wasted a call, be back at square one, and have to sit through even more soul-destroying ambient hold music to get back to where you were. In some cases, customers who have been particularly abusive to staff have found that their credit rating has fallen, or in more extreme cases, have found themselves being sued by the member of staff for harassment.