What happens when you ignore debt?

What happens when you ignore debt?

Are you one of the millions of people who’ve put a debt reminder letter in a drawer – hoping that the problem will go away?

If you are, you’re most definitely not alone.

Lots people ignore their debt – some for a few days – but many for weeks or even months, trying to forget about it, hoping it will go away.

The problem is, debt doesn’t go away – and actually, ignoring it can make things worse. We’ll walk you through what happens to debt when it’s ignored – and the steps you can take that will get you back on track.

Pretending debt doesn’t exist

People refer to ignoring debt as ‘burying your head in the sand’ – and, true to the phrase, the world goes on around you – even if you’re ignoring it.

And, unfortunately, your creditors are part of that world. They don’t stop their process just because you’ve stopped replying or answering their phone calls. What’s worse – ignoring calls often ups the intensity of how they contact you – and often adds additional charges.

As a result – the final amount you’re expected to pay can add up to a lot more than the initial debt – and in a lot of cases, the amount of money becomes expected as a one-off, rather than being payable in instalments as it had been previously.

How does debt catch up with you?

You may have heard rumours or hearsay that there are ways to avoid paying your debt if you hold out long enough – and while there’s some technical truth to how companies track their debt and for how long – this is an extremely damaging misconception – and can lead you into an incredible amount of financial trouble.

6 years is the amount of time that most people say it takes for debt to be written off. This figure actually comes from a person’s credit report – that’s to say, resolved financial issues are removed from your credit report after that amount of time. However, just ignoring phone calls for a few years isn’t the same!

Companies will track you down – it’s that simple. Credit referencing agencies take your information any time you sign up for a mobile phone, insurance, a payment plan for utility bills – and a host of other financial actions. They then share that information with other companies – who will get in touch with you if you owe them money.

Debt recovery and bailiffs

If you continue to ignore your reminders your debt will be passed to an agency or court for further action to be taken – and unfortunately, this is where ignoring the problem comes to an abrupt end. Some bailiffs have the power to enter your property without your permission – even employing the services of locksmiths and the police should they need to.

From there, they can remove property from your home – to contribute to the debt that’s owed. It’s not as simple as knocking on your door and taking things away – but when you reach the point a bailiff is coming to your home, there’s no more hiding from money issues.

What can you do?

If you’re facing debt that, for any reason, feels unmanageable – it’s vitally important that you talk to the companies that are chasing you. This will normally stop them adding admin charges while you’re trying to get a solution in place.

There’s good news too – there’s every chance that you might be able to reduce the amount you owe.

There are a variety of ways to tackle reducing your debt – negotiating with lenders, a debt consolidation loan, a specialist debt management product – and others – but how do you know what’s right for you?

A good place to start is to have a look at some online reviews. Face The Red is a site dedicated to reviewing companies that offer debt management options – you can see one of their reviews here: https://www.facethered.com/accredited-debt-relief-review/. Taking some time to consider your options is a great first step.

Opening a line of communication

Although it might feel like the last thing you want to do – talking to the people you owe money to is important.

You’re not the only person they’re chasing for money – in fact, most companies have full departments dedicated to debt recovery – meaning they expect tens of thousands of people to fall behind with their payments at some stage.

People often put off talking to their lenders because they think they’ll be angry or abrupt – and actually, the opposite is more likely to be true. Companies want you to repay the money you owe, and you’ve not likely to do that and continue to communicate if someone is unpleasant to you over the telephone. Generally speaking, you’ll find the people you talk to professional and courteous – and often really understanding of the situation you’ve found yourself in.

Working out how much you can repay

Whether you talk to the company directly or us a specialist service to reduce your debt, you’re going to need to know how much you can afford to pay. To do this you’ll need to put together a quick household budget – but don’t worry, it won’t take you long.

The first thing to do is to list any household income. After this, list all your essential outgoings – mortgage, rent, bills, food, clothing – and so forth. You can take this figure away from your ‘incomings’ figure to work out what you have left over beyond your living expenses.

Putting a budget together like this is important for two reasons:

  1. It will give you an indication of how much it costs you to live – and how much you can look at paying back to the companies you owe.
  2. This exercise shows the companies you’re talking to that you’re seriously considering how to work your way out of debt.

Although it might mean tightening the financial belt for a period of time, starting to pay back the money you owe can come with a huge sense of relief. You know that those letters in the drawer aren’t going to go away – nor are the phone calls or knocks at the door. Working toward reducing or handling your debt now is likely to save you from lots of sleepless nights and debt related stress further down the line.

Top financial worries of Americans in 2017

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Money is not exactly the root of all evil, but it can give a person a massive headache. 1 in 4 Americans say that money is something that is on their minds the most, daily. That’s a large number, by any standard, and one that was discovered in the  Life + Money Survey conducted by the GOBankingRates 2015. While a quarter of people worry about money on a daily basis, over half of those are concerned about three or more financial problems at a time.

Naturally, one of the best ways to combat financial issues is to confront them – even if that means a temporary loan, to get rid of an emergency payment before it escalates (maybe your car broke down and you can’t get to work without it. If you can’t work, those debts will just get worse). You can apply for a prosper personal loan here, for example, to help you in a pinch.

The message is, however you decide to face these concerns, is to face them. You can declaw the fear of debt and money management by taking direct action, feeding the feelings of progress and accomplishment instead. It’s not as scary as it might seem, and as you will see there are things that can be done, depending on the concern.

Overspending

For many people, the single biggest concern is just making ends meet. Budgets can be a struggle to stick with for many people, with a fifth of people saying that budgeting is their biggest financial concern. This isn’t all that surprising, however,since that the struggle of sticking to a budget, for around two thirds of people, comes from them not having that much of a budget to start with such is the cost of living in modern America.

How do you fix the problem of overspending and not being able to stick to a budget? The first step is to work out your income and expenses for the month. While doing this, look to see where you could save a couple of dollars  – there is always something can be trimmed back. For instance, you could eat takeout less or switching your cable TV package for a cheaper one. Quitting smoking can save a lot of money too, and improve your overall health into the bargain.

Setting out a monthly plan in this way allows you to see your income vs expenses in a big-picture kind of a way, and helps you stick to budgets better.

Retirement planning

If this is a concern of yours then you are not alone, not even close. Over half of the population of the United States have no retirement savings to speak of, and almost 30% of those don’t have savings or a pension plan either, according to the U.S. Government Accountability Office. With figures like that, is it any wonder that planning for retirement is one of the biggest concerns of Americans in 2017.

People that are approaching retirement age, unsurprisingly, have a more finely tuned sense of urgency about building up their savings. Those aged between 55 to 64 are among those most likely to say that retirement saving is their biggest financial worry.

Fixing this problem is a little trickier than simply ‘saving’ or budgeting. That said, it is still better to face these things head on rather than ignore it and hope it all works out. You should always aim to save the maximum amounts per year that you can, however. For example, employee contributions in 2015 for 401ks were $18k. People aged over 50 can also add an extra ‘top-up’ of $6k a year so that they can catch up.

Even if you are behind with contributions, hitting the maximums now will help you be better prepared. If you are not involved with a 401k, then that obviously has to be your first priority. Additionally, if you able to get professional help then you should probably do so in order to get your accounts in order.

Spiraling debt

Credit card and medical debts can be financially crippling, and sometimes impossible to avoid, at least in the case of medical debts. This very real struggle is highlighted in the GOBankingRates survey, linked to above. The survey mentions that credit card debt is a significant worry for roughly 12% of all Americans today.

Getting on top of credit card  and medical debts and taking ownership of them is crucial and to achieve this you need to get a firm grip on your financial habits. If this means a lifestyle change so that money can be diverted from non essential items to pay off debts then so be it. Own that debt and do something about it. Living within your means, and even lower, does not mean that you have to live like you are penniless, it just means being smarter with your lifestyle / purchasing choices.

Lack of emergency funds

When wages don’t increase, there are several side effects that can be seen almost immediately. Savings rates don’t improve for a start, and saving for that rainy day just gets harder not to mention living expenses increasing which is an issue on its own when income stays the same. Finding that extra bit of cash to put away in case of emergency is a non-starter for many people.

Those people on lower incomes to begin with often say that the rainy day / emergency fund issue is one of their top concerns. Not having that buffer, in case something goes wrong, can leave people feeling exposed and vulnerable, sometimes being just one mishap away from total disaster. If your car dies on you for example, and there is no money saved away to fix it, then that could result in a lost job – making the situation far worse than it could have been.

Over half of Americans will experience this kind of stress at some stage, and it isn’t just the threat of losing a job. Medical expenses can be a massive problem too, as can issues around the home such as burst pipes or broken water heaters.

This problem can be addressed by stowing away just a few dollars a month. Even just $20 can have a profound effect later down the line should the unthinkable happen. This could be extra cash from anywhere. Small change from the store, refunds… Anything that can be deposited.

You are not alone if you are struggling with finances, and there are things that can be done to help yourself. Hopefully you will now have some idea on how to proceed.

How a Mortgage Broker Can Help You

How a Mortgage Broker Can Help You

Moving house is always an extremely stressful time, and that pressure only intensifies when you’re buying a property – mortgage applications can add all kinds of wrinkles to the moving process. When you’re already spending a small fortune on a new home, why should you dig even deeper and locate the finance to pay a commission to such a professional?

There are actually a number of reasons why bringing a professional Dumfries Mortgage broker into your house purchase is advisable. While you may balk at the idea of paying for the assistance initially, it can save you a great deal of money and heartache further into your investment.

Greater Protection

The first, and arguably the most important, thing that a mortgage broker can offer anybody buying a house is protection. We all remember the housing market crash of 2008, with a great many homeowners being offered mortgages beyond their means and running into trouble making repayments down the line. Unlike a high street lender, who will have his or her own priorities, a mortgage broker will be working for you and you alone.

This means that your broker will ensure that any mortgage recommendation will be in your best interests; if a mortgage broker is suggesting you put pen to paper on an application, they will need to justify their decision. This is a legally binding contract that allows you to make a complaint or request further justification if you consider this to be necessary. This means that your broker will only advise you to sign on for a mortgage that you can comfortably repay.

Yes, a bank or building society will run their own affordability and legibility checks, but bringing a  mortgage broker into the equation will give you plenty of opportunities for legal recourse in the (hopefully unlikely) event of a problem arising; if your mortgage was agreed on a basis of false or erroneous information, you’ll be eligible for a compensation claim to ensure that you are not left out of pocket.

 A High Degree of Specialist Expertise

Next up, consider the expertise that a mortgage broker can bring to the process – they do this for a living, after all. Only so much information can be gleaned from searching online and along the high street, and the offers made available in such circumstances will be drowned in small print that a layperson may struggle to decipher. It’s human nature that anybody searching for a mortgage will focus on the interest rates on offer, for example, but a broker will be aware the other costs and hidden fees that can add up.

A price you see on advertisement may not end up being the price that you are expected to pay once all expenses have been totalled, and a mortgage broker can prevent any nasty surprises from arising and leaving your house purchase in jeopardy at the eleventh hour.

Just as appealing is the fact that you can bring such a professional aboard to do the grunt work of actually finding a mortgage for you. Sit back and relax, while your broker brings the possibilities to you – no more trawling around the high street and the darkest corners of the Internet attempting to make sense of the lingo. You can also be assured that any offer brought to you by a mortgage broker is entirely legitimate, from a trusted vendor. Different people will have different experiences from a variety of lenders and you can’t rely on anecdotal evidence – you can, however, place your faith in a broker to bring you the best possible mortgage deal from a supplier that can be relied upon.

 Managing the Long Term Effects of a Mortgage

Perhaps more importantly, a mortgage broker will never encourage you to apply for a lending plan that you are unlikely to be accepted for. An unsuccessful mortgage application can be extremely damaging to your credit rating, which will make future applications trickier – and all of that can be avoided by simply staying in the appropriate lane when seeking a loan. What’s more, a mortgage broker will have fast-track access to a number of senior employees within the average high street bank or building society and special broker-only rates, potentially opening the door to great offers that would not be available to you otherwise.

Mortgage brokers are also qualified professionals within the field of finance, meaning that their services will not begin and end with the application of your mortgage. A qualified broker will also be able to source and advise on appropriate home insurance for your new property, and will be able to make suggestions on the best possible health, life and redundancy insurance packages.

Never take a chance on matters such as this, as they could mean the difference between keeping your home in the event of an unexpected turn of events, or facing the further misfortune of foreclosure.

These years of study will also mean that a mortgage broker can complete conveyance paperwork far more quickly and efficiently than most applicants could ever manage by themselves.

The rules surrounding mortgage lending are constantly adapting and changing, and have grown considerably stricter in recent years. Some of the questions that will be posed on the many application forms will be somewhat baffling to a layperson, and a qualified mortgage broker will know exactly how to answer them based on information that you provide and still get the best possible rate based on your circumstances.

Taking out a mortgage can be a huge event, especially if you are doing so for the first time, and there is a great deal that can cause home buyers a headache and unnecessary expense. Bringing a mortgage broker on-board to assist in the process can be the difference between success and failure in your application – and in making future repayments.

 

What’s Old is New: The Return of the Credit Bubble

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If you’re old enough to care about the contents of this article you’re old enough to remember the unnatural disaster that occurred in 2008-2009 commonly known as The Great Recession. That global financial meltdown, driven by an insatiable demand for easy credit, was only prevented from dragging the entire world economy into a black hole from which there would be no return by the unprecedented intervention of the world’s leading central banks. They printed trillions of dollars of new money and injected it into the system to cover bad debt, bail out huge banks and fund government takeovers of other financial institutions. In essence the West borrowed its way out of a debt crisis.

The Sweet Sound of Alarm Bells Peeling O’er the Land

Fast forward less than a decade to 2017 most of us are still not financially independent and you don’t have to strain to hear financial watchdogs once again sounding the credit alarm. Although the nature of the risk may be slightly different this time around (personal debt as opposed to credit default swaps) the tune is the same: we’re borrowing our way toward financial Armageddon.

Take for example household debt in the UK. In March British consumers added £1.6 billion to the good ship Personal Debt, a 10.2% jump over last year’s already bloated numbers. In November 2016 that year on year increase was 10.9%, the highest since 2005 when the housing bubble was in full swing. If this were a new phenomenon it might not seem such a big deal. But coming at a time when the global economy still hasn’t fully recovered from the Great Recession it has more than a few experts trembling in their wingtips. Here’s why.

The Dangers of Easy Money

In the days leading up to the 2008 meltdown people all over the Western world were gorging on easy money: “No job? No savings? No collateral? No problem! Here’s a million dollars for that dream house of yours. Just be sure you flip it quick – and for a handsome profit – or our next meeting will be at the soup kitchen! Ha ha ha ha.” Of course it didn’t take much to blow over the whole house of cards and expose the fantasy island both lenders and borrowers were living on.

Again, while the problem today is slightly different in nature the dynamics are essentially the same. Consumers, seduced by historically low interest rates, are taking on more debt than they can reasonably be expected to pay back. All it will take to capsize the good ship Personal Debt today is a slight downturn in the economy or a sudden spike in interest rates. If one or both of those things happen millions of households will likely find themselves unable to even make minimum monthly payments and the dominos will begin to fall.

And there are already indications that pressures are mounting on the first few dominos. Staff at the National Debtline for instance report the 1st quarter of 2017 was the worst they’ve experienced since the dark days of 2009. While others are scrambling to find any sign of good news in what is an increasingly bleak debt picture.

The Changing Nature of Debt

Another difference between the nature of today’s credit bubble and that of 2008 is that this one is driven at least in part by consumers borrowing to cover essentials. And that by itself is more than a little frightening because it suggests that, not only have we not recovered from 2008, but we’ve now decided that borrowing is the only way to make up for the shortfall in that recovery. And if that’s true it can’t lead anywhere good.

As proof of this recently released figures indicate that both consumer credit and student loan debt are higher today than they were in the run-up to the 2008 meltdown and that 26% of household spending today is deficit spending. Compare that figure to the British government which relies on borrowing to cover about 15% of current expenditures; a figure many consider outrageous. In fact unsecured debt is now £11,800 per household; the highest it has ever been.

(Bad) Credit Where it’s Due

It has to be said that, while many in the banking sector today are raising red flags over the issue of consumer debt, it’s more than a little disingenuous of them to do so. After all, it’s not consumers who are printing credit cards at a furious pace and offering 0% interest on loans and the like. Only the banks can do that. People are just taking them up on their offer because they don’t see any other way to make ends meet.

On the bright side at least one bank (the Bank of England) has tacitly acknowledged their role in creating the problem by ordering a review of their non-business lending practices. However, while this is a necessary step in the right direction it will have to become the industry norm, and fast, if we’re to head off the new meltdown many see heading our way.

The Way Forward

Obviously one can’t build a sustainable economy on unlimited borrowing. As everyone should have learned in 2008 the debt chickens eventually come home to roost and they all want to be fed. Getting hold of the situation and instituting necessary changes won’t be easy but the alternatives are bleak and bleaker. So what are those necessary changes? Well, at minimum they look like this:

  • Wages need to rise.
  • Financial institutions have to reign in their lending practices.
  • Governments need to hold financial institutions accountable for reckless behaviour.

In spite of the increase in personal debt in March there are a few barely perceptible indications that consumers may be starting to exercise a bit more restraint. However, as of this writing these blips on the horizon have yet to coalesce into a discernible trend. The overall situation remains extremely worrisome and unless things can be turned around fairly soon most every economist worth their salt knows where they’re headed.

Coming to Terms with Your Debt Problems

Coming to Terms with Your Debt Problems

Having an immense amount of debt is no laughing matter. It can cause havoc not only in your overall financial situation but also in your personal life as well. That is why you must do your best to resolve it as quickly as you can.

Coming to Terms with the Problem

When we say problem, we are not simple pertaining to the debt itself. Unfortunately, it is just a symptom of a much larger problem. Obviously, people do not take on massive amounts of debt for no reason. Think long and hard on how you got to this point in the first place.

Recognizing the root of your debt problems is the first step to solving it. For instance, some people take on debts to deal with their gambling problems. Others took on massive credit card debt because they became addicted to spending money they do not really have.

Identifying the negative behavior is the first step. Of course, by no means does this entail that the process will be easy. In fact, we guarantee that it will probably be an uphill climb and it is one that has to be done with full resolve and determination.