Is your mortgage your top priority?

Regardless of your financial situation if you have your own home with a mortgage it should always be your priority to pay it above all other debts. If you are in debt and owe money to many different lenders you will probably have experienced creditors chasing you for money.

Chasing from unsecured lenders is often different from secured lenders. Unsecured lenders have a faster process and when a debtor misses a payment, or makes a reduced payment, they will begin chasing procedures straight away.

Secured lenders, on the other hand, commonly take longer to process missed payments and are usually less active with their chasing for the missing payments. It is usually because of this that debtors find it less hassle if they pay their unsecured creditors over their mortgage.

If you are experiencing financial difficulty, here at Payplan we would always advise that you pay all of your priority payments first and with then share any left-over funds between your creditors. If you need assistance then please speak to a trained debt specialist for free and impartial advice.

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Understanding interest rates and charges.

An ePetition was recently launched by Martin Lewis’ Money Saving Experts Website to bring financial education into schools. The petition caused a lot of debate amongst lots of people, as some believe that debt occurs because of lack of knowledge, while others believe it is due to unforeseen events such as illness, redundancy or an addition to the family.

Whatever your reason for debt, it is always important for you to have an understanding about the charges that are applied to your credit cards and loans.

If you have taken out a loan you will know that you signed an agreement prior to it outlining the amount you are borrowing, the interest percentage that will be charged and the total amount that you will pay back as well as detailing your repayment amount and period. This agreement is known as a Consumer Credit Agreement and is required under the Consumer Credit Act. Once you have signed this agreement, you are acknowledging and accepting the terms including interest and charges that may be applied if you fail to comply with the agreement.

If you have taken out a credit card you will once again know that you must sign and agree to a Consumer Credit Agreement, the same as with a loan. With a credit card, the card provider can increase or reduce the interest rate over the time that you have your account. The new interest rate will apply to all of the money you owe on your card, except for any amounts you may have at special promotional rates.

If your card provider decides to increase your interest rate, it must give you at least 30 days’ notice. When card providers tell you about an increase in your interest rate, they will explain in clear language how it is changing, what it will cost and the options available to you.

You can decide not to accept the new interest rate. If you do this within 60 days, your card provider will close the account and you will need to pay back the money you owe at the current interest rate. If your card provider also offers other lending products, such as personal loans, it may let you transfer the balance on your credit card or store card to one of these, at your current interest rate (or a lower rate).

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Loan Sharks – who and what are they?

Over recent years, borrowing from ‘traditional’ lenders, banks and credit card companies, has been harder and hard to do. As a result we have seen a rise in the number of people turning to payday loans and illegal loan sharks.

A loan shark is someone who will give a person a loan, charging them a high level of interest and short repayment terms. Loan sharks are unlicensed and operate illegally, as well as being unregulated from any governing financial body.

Loan sharks commonly prey on the most vulnerable people who have nowhere else to turn. When people struggle to pay them back, loan sharks often turn to threatening tactics to get payments from the debtor.

With many finding it more and more difficult to borrow in these tough economic times, increasingly people are turning to loan sharks. Figures released in 2009 by research agency, Debt on our Doorsteps, showed an estimated seven million people have borrowed from loan sharks.

If you have borrowed from an illegal loan shark and do not know what to do next… firstly you need to report them to the police or the Illegal Money Lending Team, details can be found on Direct Gov website by clicking here. Once you have done this you many want to look at your finances and seek free and impartial advice from Payplan to help you arrange your finances.

Have you had experience with a loan shark? Would you like to share your story and help others? This is the place to do it.

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Learning from your mistakes

For those who have experienced debt and what it feels like to not know how the monthly bills will be paid, how the family will be fed or whether their creditor commitments will be met may be looking for where it went wrong and ensure they learn from their mistakes. Here is a Payplan client talking about her experience:

“My problem with debt began when I became a student aged 18. I opened a student bank account and was “sold” an interest free credit card and got a huge student overdraft by a cashier in the bank. It seemed like a good idea to buy in books and help when I was short on cash but then I started living beyond my means and mis-spending. I then got into a relationship with someone who earned a lot more than me and he encouraged credit cards in order to live a lifestyle of social events, eating out and luxury holidays. I felt under lots of pressure to match and keep up with his lifestyle so the credit cards got out of control. When one was maxed out, I got a new one and another and another. I also supported my family financially when they were in times of financial difficulties and would use my credit card to withdraw money. When I split from my partner I was left with a lot of debt to repay on my own and I became much stressed and under pressure regarding money, I was struggling to pay debts. I was only making minimal payments but the debt wasn’t reducing that’s when I decided I had to take action and after a lot of research and recommendations I chose PayPlan to help me. Now my debts are being dealt with and I am much more assured about my finances and can live my life without the financial worry hanging over me.”

You could try writing down how you got into debt and what lead you to getting in the situation where you could no longer afford to pay it back. We often ask a lot of our clients to do the same and many say that this helps them reflect and learn from their past experiences.

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