The entire world is in the grips of a recession with businesses scaling back and UK residents, like people everywhere, facing job losses and rising prices. The result is that people who previously were able to meet there monthly commitments without difficulty are now realizing that they are deeply in debt and have nowhere to turn in order to find the money they need to pay their bills. Many are facing repossession of their homes and have to look at the possibility of filing for bankruptcy.

The debt charity, National Debtline, has reported an increase in the calls to their hotline from people who do not know what to do about their financial situations. One caller reports that in an attempt to keep the mortgage payments up to date on her home, she has neglected other payments and now she has creditors looking for repayments.

This is a typical situation with many residents finding themselves owing large amounts of money on credit cards and store cards. These creditors are stepping up their efforts to receive payment and are placing charge orders on residents that could force them to sell their homes.

In Britain today, this is a common situation. The debt advisors on the other end of the line try to calm down the callers and allay their fears by offering them solutions to their debt problems.  One of the ways in which they do this is to explain the legal system to the callers and explain what charging orders mean for them. They highlight the options that the callers have left open and in most cases these are quite limited.

“I am resigned to losing my home,” says one caller to the National Debtline, “I can no longer to maintain it.” The problem with putting a home for sale in an effort to obtain the money needed to repay the debt, however, is not a viable solution. This is because house prices have fallen to the point that the sale will not even produce the money needed to pay off the mortgage and the other debts will still remain outstanding. For most, the only recourse is to file for bankruptcy.

Even to declare bankruptcy is costly. A fee of £495 applies to the court charges for bankruptcy filing and most callers do not have this money available.  There are ways though in which UK residents faced with this possibility can obtain the money for this court fee.

There are charitable organizations from which one can get help in paying the fee. The process of getting help with dent advice through the National Debtline takes about an hour and the caller will receive an application form for bankruptcy and help in paying the fees.

Debt advisors report an increase in calls of this nature in recent months. One of the advisors, Aidan Tidy, says that the calls come from all walks of life. Executives and professionals, who had been earning high salaries, are now struggling to keep up with the payments in order to preserve the lifestyle to which they have become accustomed.

Another caller looking for debt advice, Graham, aged 42, says that in the past he had an impeccable credit record and had no problems making payments on credit cards.  Graham is an office administrator who currently owes about £56,000 and has not possible way of making the current payments.

According to Graham, he had access to lots of credit and that was part of the problem. “I borrowed money with every intention of paying it back, but circumstances change,” he says.  “I was getting lots of aggressive letters from creditors and you just feel lonely and vulnerable.

The calls to the National Debtline have doubled in 2009. In January, 2008, the center received about 800 calls a day. In January, 2009, there are about 1600 calls every day.

Another debt advice service, Citizen Advice, reports that they have also seen a dramatic increase in the number of people who are experiencing problems meeting the payments on their credit cards, secured loans and mortgages, all of which are affecting their ability to continue fighting repossession.  Citizen Advice took 3000 calls on January 5, 2009 and are averaging about 2000 calls a day ever since.

The government awarded more than £ 5 million to National Debtline last year to help it pay the salaries of fifty additional counsellors. When these training positions were advertised, there were more than 5000 applications received.

The problem that many people are encountering when looking for help in debt counselling is that there are many agencies who charge a fee for this service.  National Debtline does not charge for its service and trained advisors will help callers find viable solutions to their money problems.

It is always better to ask for help than to suffer in silence. “The earlier you call the better, but it’s never too late to seek help,” one advisor says,  “If you act in a sensible and open way with your creditors, most of the time you can arrive at a workable solution.”

When you find yourself drowning in debt, you do need to sit down and make a plan for how you can keep your head above water and finally get out of the water completely. More and more UK residents are feeling the pinch of the credit crunch with rising prices that does not leave them with enough money each month to make their normal payments.

Many people don’t even realize how much debt they have and the total of their monthly outgoings until they sit down to formulate a budget and a repayment plan.

To start making a budget for yourself, you need to make a list of all your monthly payments. In doing this, it will be helpful if you also list the outstanding balances of all the debts and the interest rate charged on each one. Don’t forget to include your electricity, fuel, and utility payments because these are essential services.

The amount of money you spend on groceries and leisure also has to be part of this plan. Add up the amount of the outgoings and subtract it from the amount of income you have each month. If you find that there is a negative amount because you have more outgoings that income, then you are in financial difficulty and need the services of a professional to help you clear your debt.

Once you have a clear picture of your finances, then you are in a better position to come up with a structured plan for repaying your debts with the goal of paying them all off in full. The credit cards and loans that have the highest interest rates are the ones you should get rid of first. If you have a credit card or line of credit with a low interest rate, you can transfer some of the balances. The minimum payment may be a little higher but it will still leave you with extra money for paying other bills.

If you are not experiencing any difficulties in making your monthly payment, but need a structured plan to help you clear your debts, any extra money you have can go towards reducing your debts. If you transfer balances to a lower credit card, for example, you can still continue to make the same payment amounts and in this way, you will reduce the balance by a larger amount each month. As you pay off one debt, apply the money to another, and so on. By making larger monthly payments you are reducing the amount of interest that you pay and this reduces the term of the loan.

Another solution for clearing your debts is to take out a debt consolidation loan. In such a loan, the lender will pay off the outstanding balances of the accounts you choose and give you a loan for the total amount.

You will still owe the same amount of money, but instead of having to make several payments on different loans, you have only one monthly payment that is lower than the total of the combined payments because you only have one creditor instead of three or four.

This will relieve some of your financial stress because it does leave you with extra money each month for essentials and to make higher payments on any debts that were not included in the debt consolidation loan.

If neither of these structured plans suits your financial situation, you can avail of the help debt counsellors can provide. Such people can contact your creditors and negotiate with them to lower your payments. They can set up a structured plan for you so that you can make the payment to the counselling agency and the counsellor will disperse the payments to the creditors for you. The amount you do have to pay will be based on your income, your level of debt and the number and amounts of your payments.

Store cards and credit cards do carry high rates of interest and often you do not know how much your payment will be from month to month. It is best to try to eliminate these loans and combine the balances into one loan so that you do have a set amount of payment each month. You can also contact a lender to take out a secured or unsecured loan that will help you organize your finances and make it easier for you to keep up with your monthly commitments.

It is important to get a handle on your finances in an attempt to clear your debts so that you can keep making your payments on time. This will help you keep your good credit rating and allow you to maintain the same borrowing power. When you have a good credit rating, you can also take advantage of good interest rates on any money that you borrow.

As we all know insuring your car can be an expensive business. In the past shopping around for a cheaper quote was time consuming so many of us just accepted our renewal notice even though we knew we were probably paying over the odds.

Car insurance companies use different methods to decide what to charge each driver. So although one company might be cheapest for you, it could be more expensive for someone else. With the rise of comparison sites, it is now possible to get a sample of quotes from a large number of insurers in a matter of minutes, taking all the hassle out of finding a cheaper quote.

Car insurance is a very competitive product so there are often substantial gains to be made by shopping around. The average premium we pay is in the region of £300 to £400 a year and it’s reckoned that one in six of us claim on our car insurance each year with the average payout being around £2,000.

As well as shopping around, what else can help you save money on your car insurance?
Discounts and multiple policies

Some companies offer a decent discount if you insure more than one car with them. You can also get additional discounts if you have other types of insurance policy, e.g. home insurance, with the same insurer.

Third party or fully comp?

There are three levels of car insurance cover – third party, third party, fire & theft and fully comprehensive. Fully comprehensive is usually the most expensive so, if you drive an old banger, it may not be worth it as your car will probably be written off if any sizeable repairs are required. That said, rather bizarrely, with some insurers fully comprehensive is the cheapest of the three, so you might make a saving by switching from third party to fully comp.

You

Your age is one of the biggest determinants of your car insurance costs. Young drivers are the most expensive to insure with males under 20 hit hardest. Some insurers offer discounts if you take the Pass Plus training scheme. This involves continual assessment over six modules and costs £180 although some local councils offer a discount of up to 50%.

Premiums then fall quickly until you reach the age of 25 and then decrease marginally after that. Those in their 50s and 60s tend to pay the least for their cover. The cost of insurance then starts rising again once you’re in your 70s and 80s. It’s worth noting that many car dealers offer free insurance deals when you buy a car and these can be particularly valuable for younger drivers.

Female drivers usually pay less for car insurance, especially below the age of 25. This has led to a number of female-only car insurance firms. However, these don’t always offer the cheapest rates so it’s still worth shopping around as you could get cheaper cover elsewhere.

Make sure you describe yourself accurately. If you’re a homeowner or married then you’re likely to get a lower quote. Your job can also have a big impact. Quite often you’ll find that there are several different job descriptions you can choose which all describe what you do. If can be worth experimenting with these to see which provides the lowest quote.

Your car

The type of car you drive will affect your premiums dramatically. Any modifications made to the car, whether they improve its performance or not, can also push your premiums higher. You can bring down your car insurance costs by having an alarm or immobiliser.

Where you keep the car can make a difference too. A garage is best but off-road parking is usually cheaper too. Where you live will affect your premiums, although moving to get cheaper car insurance is somewhat of a radical step! Some parts of London are twice as expensive as the cheapest postcodes in the country.

Your mileage

If you’re a low mileage driver then this could result in you paying lower premiums. Check the mileage noted on your MOT certificate if you have an older car. You might be surprised at how few miles you actually do.

Recently a few insurers have started providing ‘pay as you go’ insurance using technology to track where and when you drive your car. Working out if this will be cheaper is not always easy but if you’re a young driver who doesn’t often drive at night it’s worth investigating.

Paying monthly

Paying monthly can help to spread the cost of large car insurance bills but the rate of interest charged can sometimes be as high as 30%. For younger drivers this could mean an additional £200 to £300 a year. A 0% credit card can often be a smarter option if you need to spread the cost.

Additional drivers

Adding additional drivers to your policy can bring down your costs, especially if you’re a younger driver. In the past many parents have named themselves as main drivers of their children’s car but insurance companies are cracking down on this. With some polices it is possible to start building up a no claims bonus as an additional driver so this can often be a good way for young, occasional drivers to cut their future car insurance costs.

Many policies use to let you use someone else’s car as long as you had their permission but this clause is increasingly being removed so, if you think this may affect you, make sure you check the policy wording.

Tweak your excess

Varying your excess can be a worthwhile exercise. A higher excess, if you can afford it, can bring down your costs considerably. Sometimes reducing your excess is worth checking too, as it may not necessarily increase your premiums.

Most companies have a separate excess for windscreen damage so check the policy wording for this. There may be a maximum number of claims per year as well.

Optional extras

There a number of optional extras you can get alongside your main policy. You might want the use of a courtesy car while your car is being repaired or you might want to be insured for driving your car in Europe.

Legal cover costs around £20 and in the event of an accident that is not your fault will help you claim back items not covered by your car insurance policy. These might include your excess, additional travel costs, damage to possessions you had in the car and so on. Opinions are divided on whether it’s worth paying for. You may already have legal cover through your employer or union.

No claims discount protection is another add on, which typically costs around £30. It might not prevent your car insurance rising next year as, although you’ll keep your percentage discount, the gross amount you’re charged might still increase because you’re perceived as being a higher risk.

There may also be a limit on the number of claims you can make within a certain time period e.g. twice in three years. But, on the whole, it’s considered to be worth the money, especially if you’d find a hike in your premium next year difficult to pay for.

Typically, without no claims discount protection, one claim will result in you losing two years worth of no claims bonus.

Credit card companies have many different ways of squeezing a little extra cash out of your wallets. Sometimes the amounts are quite small, but after several years the cumulative effect of all these tricks can cost you a sizable sum.

The minimum monthly payment trick

Many people look upon the low minimum monthly repayment you can make on a credit card as a blessing. In fact, it’s just the opposite. The minimum you can pay has become steadily lower in recent years and now the higher of 2% of your outstanding balance or £5 is fairly typical for a minimum monthly repayment.

Now 2% a month doesn’t sound too bad. Over the course of a year this should mean you pay off almost a quarter of your original debt. The problem though is the high rate of interest that credit cards charge. If you’re being charged 20% interest a year, payments of 2% a month are only going to make a small dent in your debts over the course of a year.

Indeed, paying the minimum amount on a credit card can result in a debt that lasts far, far longer than the typical mortgage – and that’s 25 years. An example will help demonstrate this. Say you have a £3,000 balance with interest charged at 20%. If you pay the minimum of 2% or £5 this debt will be cleared in …… wait for it …… just over 52 years! So if you take out this credit card at 18 you’ll still be paying it off on your 70th birthday. You’ll also be charged over £9,000 in interest over this time, which is over three times the original debt in interest alone

Paying the minimum amount is fine when you have a 0% balance transfer or purchase deal. But with a normal credit card, it’s a life-long debt sentence. If you have more than one card, then pay as much as possible on the one with the highest interest rate and the minimum (or as much as you can afford) on the others. Continue doing this until the first cards is paid off and then repeat the process with the second card and so on. This way you can escape the curse of the minimum monthly repayment!

Card protection insurance

In contrast to our first pitfall, this one is relatively minor. Well, you probably need a breather after that shock.

Card protection insurance provides an emergency service should your credit cards get stolen or lost. They’ll ring up all your card providers, organise replacements and ensure you don’t lose any money as a result. It’s usually offered by one of two main providers – Sentinel or CCP. Sentinel is the largest player in the market, covering some 6 million people.

The cost of these policies is around £20 to £30 a year, so it’s hardly an enormous sum. But you covered for fraudulent losses over £50 and, in practice, banks usually waive this amount anyway. This cover often covers other people in your household too, so compared to some other forms of insurance, it’s not the worst value cover out there. Still, it’s not good value either and many people would rather have the extra £30 in their wallet.

Credit card repayment protection

Let’s turn to another form of insurance. Credit card repayment protection (CCRP for short) is a form of payment protection insurance designed to cover your card payments if you’re unable to pay them due to an accident, an illness or unemployment.

There are a couple of tricks to watch out for here. Firstly, it’s the way the cost is expressed – normally at between 70p and 80p per £100 of cover. Put this way it doesn’t sound like much. But this is for each month, meaning that to protect a balance of £3,000 can cost you almost £300 a year

The second aspect to look at is how much the policy will actually pay each month if you need it. Most policies pay somewhere between 3% and 10% a month, yet still cost around the same per £100 of cover. So a policy that pays out 3% will cost you almost £300 a year yet only pay out a maximum of around £1,000 over twelve months. Obviously those that cover 10% offer the ‘best’ value but it’s still a hefty price to pay for protection that you’ll rarely use.

So, regardless of how much your CCRP policy pays each month, this is one form of optional insurance you can well do without. If you’re worried about protecting your income, a more general form of income protection policy that protects all your outgoings, not just your credit card repayments, will offer far better value for money.

Cash withdrawals

Last of our four pitfalls is withdrawing cash on your credit card. This hits you in so many ways it’s hard to know where to start.

First up, the interest rate you get charged on cash withdrawals is usually higher than for normal purchases. It’s often in the region of 25% to 30% a year. Secondly, you don’t get the normal 45-day grace period you get with purchases, where you pay off your balance a month and a half later and don’t get charged interest. With cash withdrawals the interest starts racking up straight away

Thirdly, you’ll also get hit with a one-off fee for each cash withdrawal. This is typically around 2.5% of the amount withdrawn with a minimum of £2.50. If your withdrawal is in a foreign currency, you‘ll get hit for an additional charge of around 2.5% on top of that. Last of all, due to the way credit card companies allocate your payments, any cash withdrawals you make will be paid off last, as debts with the lowest interest rate are paid off first.

A secured loan is one in which you use some form of collateral as surety for the loan, which reduces the risk for the lender. Most lenders will require an appraisal of the property you use as collateral to ensure it does meet or exceed the amount of money you wish to borrow.

The amount of money you can borrow in a secured loan varies from one lender to another and depends on your individual circumstances, which include your income, your credit history and your ability to repay the loan based on information contained in your credit record about your other debts.

In the majority of cases, you cannot use the same property as collateral for more than one secured loan. The only exception to this is in a home equity loan in which you borrow on the equity you have built up in your home and the collateral is the amount of this equity.

Homeowners are in the best situation to borrow money in this way if they have been living in the home for a number of years and they have repaid a substantial amount of their mortgage. This gives them access to a larger amount of money because they can borrow against the difference in what they owe on the mortgage and what their home is worth on the real estate market.

Secured loans can be used for any purpose. You may need to make renovations or an addition to your home or you may want the money to pay for a much-needed holiday. You can also borrow money in this way to make a substantial investment, such as in a retirement fund.

You also have a longer repayment period when you decide that a secured loan is the one for you. Personal, unsecured loans have shorter repayment terms, such as five or ten years. If you have collateral to use for the loan, you can take out the loan for as long as 25 years, which gives you lower monthly payments.

In the UK, secured loans are available from High Street banks as well as finance companies. Brokers do not give you a loan directly, but they will help you find a lender with the most affordable terms and repayment conditions. By using a broker, you also have access to a wider range of lenders and benefits such as:

• They help get you a loan at the lowest possible interest rate
• You only need to provide your financial details one time. The broker will take your information and then offer the loan to several lenders. This does not mean that you apply to all the lenders. You only make an application once the broker finds one for you that you want to deal with.
• You also get a faster response by using a broker than you would by contacting the lender on your own.

There are risks associated with taking out a secured loan that you must be aware of before you apply. The lender won’t check your credit rating officially until you actually make a loan application. If you are not approved for the loan, this will reflect negatively on your credit report. You must also be diligent in making your monthly payments when you do get approval for the loan.

Failure to do so will result in the loss of your home because the lender will have to sell it in order to recoup the money you borrowed.

In this time of uncertainty in the financial and real estate market, you do have to make sure your home retains its value. You can borrow money in a secured loan today and there is a chance that the value of your home can decrease due to various circumstances. If this happens you could find yourself with negative equity in which the sale of your home would not net you enough money to pay the loan off in full if you find yourself in financial difficulty and unable to meet your monthly payments. The outstanding balance of the loan would be more than the property is worth.

Secured loans are available to those with a damaged credit rating because of the nature of the loan. When the lender has property it can repossess and sell to get back the money, you have more borrowing power no matter what your credit rating may be. Those with a poor credit record though will have to pay a higher rate of interest on the loan due to their poor credit history. This is another way in which the lender can recoup some of the losses it may incur because lenders do not want to have to repossess a borrower’s home unless there they have no other recourse.

When you decide that a secured loan is a way in which you can obtain the money you need for whatever purpose, you do have to keep these key facts in mind about the repayment.