Christmas is coming, which means it's time to put up decorations, sing songs, eat too much, give gifts, visit family, shop, and take on more debt. Bah humbug.
Even though most people think of Christmas as a happy time, there are many who worry about money because they can't buy gifts for everyone. For these people, it's usually the doorstep lenders who get richer instead of them and their families. It's tempting to just put the costs on a credit card or take out a loan that won't have to be paid back for years. Unfortunately, this can have terrible long-term effects, as the recent rise in the number of requests for a repossession order shows.
Even so, there are a few simple rules that can help you avoid a financial hangover after the holidays.
First, don't just ignore it. The longer you wait, the worse your debt problem will get.
Contacting a free organization like National Debtline (0808 808 4000) can help if things look really bad. They can give debt advice over the phone, send out booklets and fact sheets, and help set up personalized plans for managing debt.
Next, bring in as much money as possible and spend as little as possible. Look for places where you can save money. Since online stores don't have to pay for expensive stores, it's often a great way to save money to buy gifts online instead of in stores. Keep an eye out for sales and take advantage of them.
If you already have debts, you shouldn't borrow more money without giving it a lot of thought and getting independent professional financial advice.
Getting a low-interest secured loan to pay off debts that were previously unsecured may seem like a good idea, but if you can't make the payments, you could lose your house. If you have loans that aren't secured, your home might not be safe either. Debt counseling groups are getting more and more worried about a growing trend among some high street lenders to put "charging orders" on borrowers' homes to get back bad debts. This means that a lender can change an agreement for an unsecured loan by going through the courts and making the debt secured on the borrower's house while still charging unsecured interest rates. A consolidation loan might seem like a good idea, but it will mean you have to borrow more money over a longer period of time, which will cost you more in interest over time.
If you decide to take out a loan, you should make sure that you get the best rate possible. The big banks, like Barclays (http://www.barclays.co.uk/loans-index), have online tools that show their current rates. Other online finance companies, like Moneynet, offer free tools to compare rates for hundreds of secured loans, unsecured loans, and even bad credit loans.
Never use a doorstep lender no matter how desperate things seem. Money Box on Radio 4 just talked about how bad things were for people in Southampton, where the average APR for a doorstep lender was a huge 177 percent. People with low incomes who are trying to get their finances back in order will have more problems and their debt will get out of hand. Community Development Finance Institutions (CDFIs) are new programs that are popping up all over the country to help people who have had trouble getting affordable credit. These are funded by a mix of public and private money, including money from some of the biggest banks. They help people who have been turned down by banks in the past get personal loans and loans for small businesses. CDFIs usually charge an interest rate of up to 24 percent per year. This is higher than the interest rates on many standards, non-adverse loans on the high street, but it is much lower than the interest rates on loans that are not regulated.
When you think about paying off your debts, you should decide which ones are the most important and start with those. First, pay your mortgage and rent. Then, pay off your essential utility bills and council tax. Only then should you try to pay off any unsecured loans.
It's important to make sure you're getting all the money you're owed as well as cutting down on any money you spend. You can get help with debt, benefits, housing, legal, discrimination, employment, immigration, and consumer issues by contacting the local Citizens Advice. They will be able to help you with most of your worries, such as whether or not you are eligible for government payments.
Even when things aren't too bad, debt problems can seem impossible to solve. During the Christmas season, things can get even worse. Start by bringing in as much money as possible and spending as little as possible. Carefully plan your budget and purchases. Make sure you're getting the best loan rates by comparing free online information at sites like Moneynet and talking to free independent advice services like National Debtline and Citizens Advice. You can regain control of your finances and have a happy Christmas.
Barclays loans are available online at www.barclays.co.uk/loans-index.
