Debt: finances

Thoughts on debt.

Debt is a problem that we all tend to get into in this day and age. I'm not a great fan of debt, but it is an easy thing to get into, even when you are moderating your spending. In my case, I had to finance a move from the USA back to the UK. The cost should have gone onto my UK credit card, but it went onto the USA one instead. This then made the logistics of paying back the debt a real case of juggling finances.

My debt is very low, yet with a low paying job - i.e. I am stating up my own business - the principal is not being reduced.

So, how do you pay the debt off?

Well, the principal needs to be paid off. Paying the minimum each month only prolongs the time of total repayment. Check all of the out-goings on the debt as you may find items that are more than you thought or you were not aware of. Do not wait to find out what these things are.

My mistake was paying for rundundancy (loss of work) protection. I had been contacted by an insurance broker working for the credit card company to push the protection plan. I distinctly remember asking for more information, definately not to sign up. The upshot is that most of my outstanding debt can be accounted for due to the fees of this plan.

It turns out that I was able to request to hear the recording of the call where I supposedly signed up. I have been advised by a friend who works in a similar industry that even though these recordings are tamper-proof, it is possible for the operator to sign you up for something without your permission and then "loose" the recording. It is my bet that I will be told the recording is missing.

When seeking compensation in a case like this, it is in your best interest to demand only that you are returned to the financial position you would have been in, if the mistake had not been made. By being resonable, the liable party may well pay a token compensation.

Debt consolidation

So, what options do you have repaying your debt when it is across multiple credit cards? Well, your final gambit, in the USA but definately NOT the UK, is to declare bankruptcy. This should be thought of as a one time "get out of jail free" card and you should only play this card when you have started coming out of debt. In other words, do not apply for bankruptcy if you still have no means to reduce your debt. When you have a job, when you have started to have money in your pocket after paying your debts AND if the debt is so large that you feel you will not be able to repay it, THEN consider banckruptcy.

What about debt consolidation? Sounds like a good idea and you will see a huge number of advertisements for this. Whilst it may be right for you to do this, you must carefully understand what it is you are doing. The key thing to remember is that a Credit Card Debt is UNSECURED. This means that the creditor has to work with you to reclaim the money. A mortgage for your house is a SECURED loan, if you don't keep up repayments, the creditor can reposes your house and sell it to reclaim the debt. Most of the time, when you use a consolidation service, the debt will become SECURED on your house, just like a mortgage. Thus, you need to be sure that you will be able, at the very minimum, to repay the monthly minimums.

A consolidated debt may well have a low monthly repayment, but the length of the repayment may be twenty five years or more and the total amount to be repayed may be an excessive amount.

Be quite clear if your consolidated debt is SECURED or UNSECURED, what the monthly repayments are, how many YEARS it will take to repay the debt and what the FINAL REPAYMENT amount will be. Do not be frightened to shop around for the best rates and terms.

With these facts in your hand, you will find you are in a better position to make an informed choice to get yourself out of debt.

Getting help

Suggesting places to look for debt consolidation can be a contentious and risky business, however, you have got to start somewhere and I take no responsibility for the content of external websites. With that said, in the UK, you might try :

Debt Management Abacus offers UK Debt Advice, Consolidation loans & Management programmes.

IMPORTANT NOTICE : I AM NOT A FINANCIAL ADVISOR, I CANNOT BE HELD RESPONSIBLE FOR THIS ADVICE. THIS INFORMATION IS WHAT I HAVE LEARNED WHILST GETTING MYSELF OUT OF DEBT. PLEASE USE THIS ARTICLE AS A REFERENCE ONLY. I DO NOT ADVOCATE ANY PARTICLUAR MEANS OF DEBT RELIEF AND CANNOT ADVISE YOU. YOU NEED TO INVESTIAGE TO FIND OUT WHAT IS RIGHT FOR YOU. With that, good luck getting out of debt.