Gregory Pennington - debt management company Debt Management help and advice from Gregory Pennington http://www.gregorypennington.com What is a Debt Relief Order (DRO)?
Available as of 6th April 2009, a DRO will last for 12 months:

  • during which, any creditor named on the order cannot take any action to recover their money unless they have the court`s permission, and
  • after which, the individual will be freed of the debts included in the order (unless their circumstances have significantly improved).

DROs don`t involve the courts, and are run by The Insolvency Service in partnership with debt advisers known as `approved intermediaries` - the people who actually help individuals apply to the Service for a DRO.

Would a Debt Relief Order be suitable for me?

As The Insolvency Service website (insolvency.gov.uk) states, a Debt Relief Order is suitable for people who don`t own their own home - but this isn`t the only condition.

People can only enter a DRO if they meet the following conditions:

  • They must be unable to pay their debts.
  • They must not owe more than £15,000.
  • The total value of their assets must not exceed £300 - although they can own a car worth up to £1,000.
  • Their disposable income (after tax, national insurance contributions and normal household expenses) must not exceed £50 per month.
  • They must live in England or Wales - or have lived / carried out business in England Wales at some time in the last 3 years.
  • They must not have been subject to another Debt Relief Order in the previous 6 years.
  • They must not be involved in another formal insolvency procedure at the time they apply.

Would a Debt Relief Order write off all my debts?

Some debts cannot be included in a DRO - such as :

  • Magistrates` court fines,
  • Student loans, and
  • Secured debts (debt secured against property)

Secured debts are unlikely to be an issue anyway, as owning property would probably mean you`re not eligible for a Debt Relief Order, as your assets would almost certainly be worth more than £300.

Does a Debt Relief Order come with any restrictions?

Yes - similar to the restrictions you would face if you were declared bankrupt. For example, you would not be able to obtain credit of £500 or more without declaring that you`re subject to a DRO.

]]> http://www.gregorypennington.com/debt-management-features/2169/what-is-a-debt-relief-order-DRO.htm Mon, 6 Apr 2009 14:8:55 GMT Debt advice and tracker mortgages
They might still need debt advice to help them stay on top of their other debts, but in many cases that debt advice is quite straightforward: make the most of that ‘spare’ money. After all, these aren’t small amounts they’re saving. Someone with a £150,000 mortgage could easily have seen their monthly mortgage payments drop by £200 or more.

Debt advice & spare money
So what is the best way of using that money? As always, it depends on your financial situation – but the right debt advice could point you in the right direction. A few ideas:

1) If you have unsecured debts (particularly if they’re high-interest debts such as credit card / store card debts), this could be an excellent opportunity to work on clearing them. How? The ‘standard’ debt advice would be ‘Put as much as possible towards the debt that charges the most interest – and once you’ve cleared this one, move on to the debt with the next-highest rate’.

2) Alternatively, overpaying your mortgage is always a good idea (if the terms allow). Mortgages normally charge much lower interest rates than other forms of debt, but they also last much longer, which means that interest can really build up. Overpaying your mortgage means you’ll owe your lender less capital, which means you’ll be paying less interest.

3) Or you could save that money. Put £200 aside for six months and you’ll have £1,200 for a rainy day. Never forget that the cost of your tracker mortgage will go up as soon as the base rate does. Depending on what happens to the bank rate, it could end up costing you a lot more than you expect.

---

These are just three ideas. There may be other, better, ways you could spend your ‘spare’ money – and it’s always a good idea to get some professional debt advice before you make your mind up.

Free debt advice – click here]]> http://www.gregorypennington.com/debt-management-features/2011/debt-advice-and-tracker-mortgages.htm Wed, 25 Feb 2009 11:49:28 GMT Debt management – helping avoid repossession
The basic fact is simple: people miss payments when they don’t have enough money to pay all their bills. However, the ones they’re missing aren’t necessarily the ones that are causing trouble. Many people find they can’t make their mortgage payments because payments to their unsecured debts are taking up too much of their income. This is something debt management can help with.

Debt management – making money available for secured debts

When someone enters a Gregory Pennington debt management plan, we talk to their unsecured lenders, asking them to accept lower monthly payments and, where possible, to freeze interest and / or waive charges.

Basically, we tell them how much our client can afford to pay them per month once they’ve taken into account what they need for their unavoidable expenses, from mortgage payments to food and utility bills. Lenders will normally understand that mortgage payments must take priority over (for example) credit card payments: most would rather accept lower payments for a while than see the borrower lose their home.

Of course, making reduced payments will mean it`ll take longer to pay off those debts – and making smaller monthly payments than originally agreed will have an impact on a borrower`s credit rating, which can make credit more expensive and / or difficult to obtain for a while. Even so, the consequences of making lower payments to unsecured debts are less serious than the consequences of missing payments to a mortgage / secured loan.

Debt management – negotiating with secured lenders

When the situation calls for it, our debt management experts will also talk to secured lenders. If one of our debt management clients is facing mortgage arrears, for example, we can talk to their mortgage provider and try to find a solution that suits both sides – a repayment plan that’ll help the borrower pay off the arrears at a realistic, affordable rate.

More on debt management.]]> http://www.gregorypennington.com/debt-management-features/1916/debt-management-helping-avoid-repossession.htm Wed, 4 Feb 2009 10:39:29 GMT Debt management and the credit crunch
In such an environment, the benefits of debt management can be even more significant than usual. Unlike debt consolidation loans, it doesn’t actually depend on borrowing more money – debt management is about rearranging the way in which you’ll repay the money you already owe. Debt consolidation mortgages (like loans) also depend on extra credit, but they often depend on the state of the housing market too, which can make them particularly hard to find when prices are dropping.

This isn’t to say that debt consolidation loans / mortgages are unavailable – there are plenty of lenders who can still help people consolidate their debts – but it may lead people to consider a debt management plan who may have chosen a different debt solution if they’d run into debt problems a couple of years ago.

In the end, it depends on the individual. Some people would still prefer (if possible) to consolidate their debts than go on a debt management plan. Others may prefer debt management. Others may find a different debt solution – an IVA (Individual Voluntary Arrangement) or Trust Deed, for example – is more appropriate.

Debt management – more information
If you’d like some free debt advice or information about any of these debt solutions, call one of our expert debt advisers on freephone 0800 161 3516. Gregory Pennington are a debt management company, but we also offer a wide range of other debt solutions, and we can help you decide which one (if any) could be the best way for you to address your debts.]]> http://www.gregorypennington.com/debt-management-features/1641/Debt-management-and-the-credit-crunch.htm Fri, 28 Nov 2008 10:23:3 GMT What does debt help mean?
By definition, that’s something that varies from one borrower to the next. Everyone’s debts are different, and two people with debt problems can need very different kinds of debt help to resolve them.

Debt advice
For some people, ‘debt help’ can simply mean a bit of advice: budgeting tips, hints on negotiating with creditors, help learning to prioritise… Sometimes, if someone’s debts are only threatening to get out of control (rather than already out of control), a few small adjustments might be enough to get their finances back in order.

Debt solutions
Other people, though, may be better off with a professional debt solution, such as a debt consolidation loan, an IVA (Individual Voluntary Arrangement) or a debt management plan (although these aren’t the only options). The right debt solution can help people in debt reduce the amount they’re spending on payments to their unsecured debts every month.

Even so, debt consolidation loans, debt management plans and IVAs are very different debt solutions. Each has its own (very different) pros and cons, and no-one should commit themselves before they’ve spoken to a professional debt adviser who understands how all the different debt solutions work, and can help them decide if one is right for them.

Debt help – sooner rather than later
If you’re worried about your debts, it’s never too late to take action, but it’s always best to seek debt help sooner, rather than later. In general, the earlier you get some debt help, the more options you’ll have – and the easier it should be to get your finances back on track.]]> http://www.gregorypennington.com/debt-management-features/1621/what-does-debt-help-mean.htm Mon, 24 Nov 2008 10:52:32 GMT Two out of three worried about the next 12 months The Times indicates that the answer could be ‘More and more people’ – it seems that today’s economic problems have seriously damaged our hopes for the coming months.

The question was this: ‘How do you think the economy will fare over the next year for you and your family?’

Back in 2003, 65% of people questioned had said they expected to do well over the coming 12 months, and just 35% thought they’d do badly. Today, the figures are almost exactly reversed, with 32% expecting to do well and 66% expecting to do badly.

 
2003
2005
2008
Sep
Apr
Nov
Apr
Jul
Well
65
75
63
50
32
Badly
35
19
28
47
66

We’ve almost grown used to bad news about the nation’s economy, but it seems the effects of the credit crunch, the mortgage crisis and dropping house prices are now affecting us as individuals. As a result, more and more people are worried about their finances. For anyone already struggling with debt problems, it’s a particularly worrying time – if they can only just manage their monthly debt repayments now, what will happen when their financial situation gets worse?

Time for debt advice?
Perhaps the only good news is that people are aware of the troubled times ahead. Anxious people are more likely to take steps to sort out their finances before it’s too late. They’re more likely to ask for help with their debts, whether that means taking advice from a debt expert or looking into professional debt solutions – a debt consolidation loan / mortgage, for example, or a debt management plan. For more serious debts (normally in the region of £15,000 or more), they might find that an IVA (Individual Voluntary Arrangement) is the best way out of debt.

Why so many different debt solutions?
Debt management, debt consolidation, IVAs, remortgages… to someone in debt, the sheer number of debt solutions available might be confusing, but they’re there for a good reason. Everyone’s situation is different, and the debt solution that’s right for one person may be totally inappropriate for another.

If you’re in debt, it’s essential to talk to a debt adviser before you sign up to any particular debt solution. Gregory Pennington, for example, has been providing free debt advice for 15 years and offers a wide range of different debt solutions to help people with different kinds of debt.

]]> http://www.gregorypennington.com/debt-management-features/1255/worried-about-debt.asp Wed, 6 Aug 2008 11:4:50 GMT Know your enemy - and the enemy is debt debt management company Gregory Pennington, it’s just as relevant – most of us don’t engage in deadly combat these days, but overwhelming personal debt makes a fearsome enemy…

Understanding debt: the start of managing debt
What’s the difference between manageable debt and unmanageable debt? It varies from person to person, but the ‘rule of thumb’ debt advice is that anyone whose unsecured debts total more than half a year’s income is in trouble.

What’s almost as dangerous, however, is not knowing how much you owe. The vast majority of us have to get by with a pretty limited disposable income, so knowing how close we are to that limit is an essential part of managing our debts.

So the results of a recent CreditExpert.co.uk survey make troubling reading: 74% of respondents couldn’t accurately state how much they owed on their loans. Even worse, 10% had no idea at all how much they owed! For anyone in that ‘no idea’ group, getting to grips with their debts should be a no.1 priority – unless they do, they won’t even know when their debts are approaching unmanageable levels.

Debt management in tough times
Today, we’re dealing with higher interest rates and expensive food and fuel and we’re facing troubles in the housing and credit markets. In other words, we’re trying to achieve more with less – trying to stretch our budgets further, at a time when credit is generally harder to come by and more expensive. Inevitably, this makes debt management more difficult for just about everyone, and almost impossible for some.

The Q2 Credit Conditions Survey from the Bank of England (BoE) confirms that:

1) Lenders have reduced the availability of:
  • secured credit for the last two quarters
  • unsecured credit for the last four quarters

...and lenders expect the availability of both to decrease further in the next quarter.

2) Lenders have become understandably ‘risk averse’, since default rates on:

  • secured credit have risen for the last four quarters
  • unsecured credit were higher than expected in Q2

...and lenders expect defaults on both to rise further in the next quarter.

Lenders are facing their own problems and can’t always provide the debt help (in the form of credit) which people need. They can’t risk stretching their finances too far, so more and more people are being forced to manage their debts without debt consolidation loans, remortgages and credit cards. It isn’t easy, but if these tough times teach us to appreciate the importance of managing our debts, at least the credit crunch will have achieved something worthwhile!

]]> http://www.gregorypennington.com/debt-management-features/1234/debt-is-your-enemy.asp Tue, 29 Jul 2008 15:31:57 GMT Managing your own debt – what if a creditor refuses an offer? managing their debt for them. In other words, they’ll handle the paperwork and distribute funds among their unsecured creditors, as well as providing advice. They’ll also talk to their creditors on their behalf, asking them to accept lower payments, freeze interest and / or waive charges: for many people, this is the best thing about a debt management plan.

Do It Yourself debt management
However, a debt management plan isn’t for everyone. Some people are quite happy to manage their own debts – and negotiate with their own creditors. In many cases, it works well: they figure out their income and expenditure, draw up a repayment plan, discuss their financial problems with each creditor and agree to an affordable way of repaying what they owe.

But it doesn’t always work out. Lenders don’t have to agree to lower payments, whoever asks them to (they might be more likely to agree if they’re asked by a representative of a professional debt management company, but they might not).

The question is this: what do you do if you make an offer and the lender rejects it?

The most important thing to do is prove that you’re trying your best to pay back what you owe – that you’d like to stick to the original repayment agreement, but your circumstances have changed and you simply can’t afford it anymore.

Write a letter
So write to them again, explaining why you can’t keep up with your payments. Describe how your situation has changed. Include a budget that shows how much you earn and where that money goes, so they can see you’re paying as much as you can.

It’s important to tell them if you owe money to other lenders, and if they’ve agreed to accept lower payments (include copies of their letters, if possible). It’s also important to explain that you couldn’t pay more without reducing your payments to these other lenders – and that you’ve already promised them you’d treat all your unsecured creditors equally.

Finally (even though they’ve already turned down your offer of reduced payments), tell your creditor you’ll start making the payments straight away as a ‘goodwill gesture’. This will show them that you’re serious about repaying the debt – and if the case ever ends up in court, it’ll also show the judge that you’re doing your best.

Remember: whenever your creditor agrees to something, ask them to confirm it in writing. Make sure you hang on to all the letters they send you – and keep copies of anything you send them.

Do you need help managing your debts?
Dealing with debt isn’t easy. If you find you’re spending time and money on phone calls and letters to creditors and still not getting anywhere, it might be worth calling in the experts.

To find out how Gregory Pennington can help you manage your debts, just click here or speak to an expert debt adviser on freephone 0800 161 3516.]]> http://www.gregorypennington.com/debt-management-features/1110/managing-your-debt.asp Tue, 17 Jun 2008 12:48:25 GMT Managing debt in a slowing economy
June’s report from the OECD* says that the world’s economies, and the UK’s, will take longer than expected to recover from shocks like oil prices and the credit crunch. It’s bad news for everyone, as a slower economy means people have less disposable cash.

But it’s particularly worrying for people whose finances are already stretched to the limit. If their entire income is already taken up managing their debts and paying for basic living expenses, how will they cope when their income goes down, their expenses go up – or both?

What’s ahead for the UK?
The credit crunch and the problems in the housing market are both slowing the economy down. The OECD thinks the nation’s GDP (Gross Domestic Product – the total value of goods and services produced) will grow by just 1.8% this year, and only 1.4% in 2009 (last year, the figure was 3%).

At the same time, the CPI (Consumer Price Index – the prices we pay for goods and services) is expected to grow by more than 3.5% later this year. That’s much higher than the government’s 2% target, so prices are rising more quickly than they should.

That high inflation means the Bank of England isn’t likely to cut its base rate, as lower interest rates mean money becomes cheaper, which adds to inflation. So lenders aren’t likely to cut their interest rates (which would make debts more manageable).

Finally, the OECD thinks unemployment will rise, from 5.4% last year to 5.5% this year and 5.8% in 2009.

What can a borrower do?
So economic growth is slowing down; prices are going up; the cost of debt (probably) won’t come down; and more people are going to be unemployed.

When household budgets get squeezed, every penny becomes more important. Any borrower struggling to keep up might find it a lot easier if they could just make their debt repayments more manageable – with a professional debt solution, perhaps.

They could, for example, take out a debt consolidation loan or mortgage. By arranging to pay it back slowly, they could reduce the amount of each monthly payment (although this would mean the debt takes longer to clear).

They might, if their debts are substantial, consider an IVA (Individual Voluntary Arrangement), a formal agreement with their unsecured creditors. They’d agree to pay a fixed monthly amount that’ll leave them with enough for their mortgage / rent and other essential living expenses. After (normally) 5 years, their outstanding unsecured debt would be written off.

Or they might join a debt management plan – asking a debt management specialist to ask their unsecured creditors to accept lower payments, freeze interest and / or waive charges. Every debt management company is different, but some will handle everything from answering phone calls and letters to renegotiating payment terms and distributing funds.

*The Organisation for Economic Co-operation and Development publishes its Economic Outlook twice a year.

]]> http://www.gregorypennington.com/debt-management-features/1088/managing-debt-in-a-slowing-economy.asp Wed, 11 Jun 2008 10:40:51 GMT Interest rates, inflation – and managing debt
Since the credit crunch started, the USA’s Federal Reserve has dropped its rate from 5.25% to 2%, hoping to help people manage their debts (from credit card bills to mortgages) by reducing the interest they pay on them. In the UK, however, the BoE has only lowered its base rate from 5.75% to 5%. Why?

Interest rates and their impact on inflation
Borrowers and savers aren’t the only ones affected by changes to the base rate. Even someone with no debts and no savings will still feel the effects that rising and falling interest rates have on inflation (the speed at which prices grow).

When interest rates are low
Money is cheaper. Saving is less profitable – but borrowing is less expensive, so debts are easier to manage. People are more likely to borrow and less likely to save. Plus, low interest rates can boost the value of assets (like houses and shares), which also means people have more money to spend. But when spending grows too fast, this can lead to high inflation, which can damage the economy – goods and services can become too expensive, and the pound becomes worth less (not just in people’s pockets, but in international financial markets).

When interest rates are high
Money is more expensive, so people are more likely to save and less likely to borrow, keeping inflation low. This is good for the nation’s long-term economic growth, but when inflation is too low, it can mean salaries grow more slowly. Plus, when interest rates are too high, people and companies can’t afford to borrow for essential things – like buying a house or growing a business.

What’s next for interest rates?
It’s hard to say. The BoE can’t just slash interest rates. It has to do a ‘balancing act’, keeping interest rates low enough to allow healthy, sensible borrowing – and help people manage their existing debts – but high enough to keep inflation under control. It’s a difficult job, not just because there’s a lot of pressure to cut rates dramatically (like the USA’s Federal Reserve did) to make people’s debts more manageable, but because any change to the base rate can take years to have their full impact on inflation, which makes it very hard to measure the effect of previous changes. ]]> http://www.gregorypennington.com/debt-management-features/1058/interest-rates-inflation-and-managing-debt.asp Mon, 2 Jun 2008 16:46:39 GMT Debt Management: when bankruptcy isn`t the answer...
A recent press release from R3 states that: ‘The true number of individuals unable to pay their debts in the UK could be three times higher than the Insolvency Service’s figures due to those in Debt Management Plans not being counted.’

Debt management halts the ‘debt spiral’
For thousands, a debt management plan is the ideal way to break free of a downward spiral into debt before it reaches the point where insolvency is the only option. If someone’s monthly debt repayments become unaffordable, most creditors will be prepared to negotiate. They may, for instance, accept lower payments, waive charges, freeze interest or grant a short ‘payment holiday’ (a period of time when the borrower has to pay nothing).

But that doesn’t mean it’s easy. Negotiations can be complex, and each creditor’s response will depend on various factors, including how many other debts the borrower has, as well as how well they’ve paid their bills in the past and why they’re in financial difficulties now. Rather than ‘going it alone’, thousands of people every year turn to professional debt management companies with the experience and expertise to negotiate for them – and do it well.

“At Gregory Pennington, for example,” says a company spokesperson, “each client is assigned a Personal Finance Manager (PFM), who gets to know their situation, answers their questions, provides advice – and anticipates any problems or opportunities that might arise as their situation changes. The PFM also oversees all negotiations with creditors, making sure that their client is kept fully informed and that all agreements reflect the needs of lender and borrower alike.”

“The vast majority of creditors are keen to help borrowers repay their debts at an affordable, sustainable rate. In most cases, creditors would prefer to discuss a debt management plan’s proposals than push for bankruptcy – rather than giving up all their assets to make a partial repayment immediately, borrowers on a debt management plan can repay their entire debt, but more slowly, and without losing their home and other valuable assets.”

Debt management – one of many debt solutions
But debt management isn’t always the answer. Rather than joining a debt management plan, borrowers might be better off taking out a debt consolidation loan / mortgage, entering an IVA (Individual Voluntary Arrangement) or Trust Deed – or going bankrupt.

“Debt is a serious matter and the consequences of approaching it the wrong way can be disastrous. Finding the right way, however, can be extremely complicated. If someone’s in financial trouble, it’s vital they talk to a company that offers a range of debt solutions, so they can make an impartial recommendation based on all the factors (income, expenditure, assets, level of debt, type of debt, etc).”

Although bankruptcy is sometimes the best way forward, even the Insolvency Service states that ‘Bankruptcy should always be the last resort as the debtor will lose control of their assets and will be subject to bankruptcy restrictions, potentially up to 15 years’. No-one should consider bankruptcy without understanding all its consequences and speaking to a debt adviser about the alternatives – and debt management, as the numbers demonstrate, is clearly an attractive alternative.]]> http://www.gregorypennington.com/debt-management-features/1033/debt-management-not-bankruptcy.asp Tue, 20 May 2008 11:27:18 GMT The plus side of falling house prices
One report by Experian suggested a 7.6 per cent fall in prices over the next two years.

But with many homes out of financial reach of a vast majority of the public, are falling house prices necessarily a bad thing?

A recent BBC poll found that more people across the UK want house prices to fall than rise. Rapid growth over the last few years has prices many potential buyers out of the market, with only 19 per cent wanting prices to continue growing.

The study found that 28 per cent of people want house prices to fall in order to be able to move from their current home.

According to the research, the vast majority of these were first-time buyers, who have been the major victims in the property sector`s rapid success.

Between 1997 and 2007, the price of an average first-time property rose from £52,674 to £159,494, according to the charity Shelter. Such a rapid rise has left many unable to afford a home and having to rent instead.

While the rental sector has been booming as a result, the lack of affordable houses has gradually slowed the market down, with no new money entering the system. Combined with the credit crunch and global financial uncertainty, house prices have started to slow and even fall.

Prime minister Gordon Brown has announced plans for shared ownership schemes for first-time buyers earning less than £60,000 a year. It is a sign that the government knows there is a problem.

House price falls are not generally welcomed by economists and financial experts. In February Kate Barker, a member of the Bank of England`s monetary policy committee, warned that a downward spiral in house prices and a drop in mortgage lending are the biggest threats to the UK economy.

"The risk I believe to be of most concern is around the interplay between the property market and the financial sector resulting from the credit turmoil," she said.

Mortgage lending is slowing. Recent figures from the Council of Mortgage Lenders found that monthly mortgage requests had fallen to their lowest total since 1975.

A study by Moneyfacts found: "With falling house prices and borrowers finding it harder and harder to get a new deal, the lenders` standard variable rates are becoming a more attractive option, but these lenders do not want to take on the more risky borrowers who do not have enough equity in their home to get a good deal."

The situation goes full circle. The solution to the problem is a period of uncertainty, where the market can correct itself and make itself more affordable to the people who need it the most.

It may be painful in the short-term, but house price falls aren`t all bad.
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]]> http://www.gregorypennington.com/debt-management-features/1025/The-plus-side-of-falling-house-prices.htm Fri, 16 May 2008 16:04:05 GMT Debt management helps the money go further
The rising cost of living may be causing everyone hardship, but it’s particularly dangerous to borrowers, many of whom are finding their finances stretched to breaking point or beyond. Someone who could comfortably afford their repayments back in 2002 may well struggle to manage their debts today. In many cases, it’s a struggle they can’t win on their own: more and more are turning to debt management and other debt solutions.

Leave room to manoeuvre
“These figures prove a point we always emphasise: just because you can afford something today, that doesn’t mean you’ll be able to afford it tomorrow,” says a spokesperson for Gregory Pennington. “Managing debt can be like walking a tightrope if your expenses grow to take up every penny of your income.”

And increases in the cost of food and utilities aren’t the only danger here. “Your income could drop. Your mortgage / rent payments could rise. You might need to repair the roof or replace an expensive item like the freezer. Any one of these events could seriously reduce your disposable income. You can’t always predict these problems, but you can protect yourself against them by not taking out credit you can only just afford.”

But what if we need to take out a loan to get through a financial crisis, or buy a car so we can accept a new job? “Life is full of calculated risks. When things don’t work out as planned, our debt management plan can be the ideal way to bring income and expenditure back into line.”

Why debt management?
“When someone asks about joining our debt management plan, we start by discussing their situation and helping them decide which debt solution is right for them – it could be debt management, but it could be a debt consolidation loan / remortgage, an IVA (Individual Voluntary Arrangement) or a Trust Deed. If debt management is the best way forward, we talk to their creditors and find out what they can do to help our client repay the debt at an affordable rate.”

“The vast majority of creditors are understanding and realistic about people’s finances. If they see that someone on our debt management plan genuinely can’t maintain their payments, they’ll be prepared to negotiate: accepting lower monthly payments, waiving charges and/or freezing interest. And they’ll renegotiate if the client’s situation changes again. It’s in everyone’s interests to keep payments at a realistic level, and that level can change all the way through the client’s debt management plan, whenever their disposable income changes.”]]> http://www.gregorypennington.com/debt-management-features/1016/debt-management-helps-money-go-further.asp Thu, 15 May 2008 14:51:10 GMT Summer hols culled as debt worries grow
Research from FairFX revealed that 57 per cent of Brits will be forced to cut back on spending - with many cancelling their break away altogether as financial stresses continue to mount.

A total of 55 per cent of respondents plan to curb foreign expenditure because the cost of living back home is too much for them and outgoings have increased drastically over the past few months.

Stephen Heath, chief executive of FairFX, said: "Brits have been forced to slash their holiday spending as the credit crunch and the hefty rise in the cost of living hits them hard in the pocket.

"Unless conditions change holidaymakers are planning to spend just £460 each on what should be the main break of the year."

According to Credit Action, the UK`s total personal debt increased by 8.9 per cent in the 12 months to the end of March.
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]]> http://www.gregorypennington.com/debt-management-features/1001/Summer-hols-culled-as-debt-worries-grow.htm Thu, 8 May 2008 09:18:30 GMT Protecting yourself against a recession
There is a one in three chance of the economy sinking into recession over the next two years, according to investment bank Lehman Brothers.

While many people may not currently be experiencing debt problems, getting personal finances into shape now - in preparation for potentially troubled times - may not be a bad thing.

The recent credit crunch has stirred the financial and property markets up in a way that has not happened since the early 1990s and, as a result, many people are not prepared for the outcome.

A recent study by Fool found that 22 per cent of working Britons - those aged between 18 and 34 - had never been through a recession before and were worried about the consequences.

David Kuo, head of personal finance at the company, said: "Young people who have not experienced previous recessions are understandably worried about the property market.

"They include both those who have just bought their first house and those who want to get on the ladder, but whose hopes are being dashed by over-cautious lenders."

The talk of a recession has already had an impact on the housing market. The Bank of England`s £50 billion liquidity boost earlier this month is a sign that things are not quite right at the moment.

Slowing property prices, combined with increasing mortgage repayments and large personal debts, could force many homeowners to miss important bills, potentially leading to repossession of property.

Liberal Democrat shadow Communities and Local Government secretary Julia Goldsworthy claimed that as many as 60,000 families may be at risk of repossession if recession hits.

"As living costs rise, and the credit crunch starts to bite, families are forced to cut back on essentials in order to keep a roof over their heads."

So how do you prepare for something that could, potentially, be so catastrophic?

If you`re thinking of moving home or changing job you might want to carefully weigh up the pros and cons. For example, it could be a bad time to take on a larger mortgage.

Clearing all debts now may help prepare for rockier times ahead, while delaying potential big purchases - such as a car - could free up some extra money to pay off debts or to line a savings account.

How long a recession lasts for is open to much debate. It could be a year, two years or five.

Tony Tan, of the Government of Singapore Investment Corporation, suggested that any recession could be worse than that of the 1970s, lasting for a number of years.

"We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years," he said.

Nevertheless, at the moment, the UK is not in a recession. In fact, as MoneyExpert`s Sean Gardner points out: "There is however a risk that we could talk ourselves into a recession by panicking."

Better be safe than sorry though.
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]]> http://www.gregorypennington.com/debt-management-features/980/Protecting-yourself-against-a-recession.htm Tue, 29 Apr 2008 09:57:00 GMT Best way to budget? Cash beats plastic
Higher mortgage payments, record costs of petrol, rising food costs… with many households finding their budgets stretched to the limit, there is “a widening gap between the amount spent in cash and the amount spent using cards, suggesting customers want to keep tight control of their finances,” as BRC Director General Stephen Robertson put it.

Budgeting: cash is simple; simple is good
When every penny counts, a simple oversight can easily push this month’s (and next month’s) budget into the red, so it’s not surprising that so many households are keeping such a close eye on their budgets.

“Hard-up customers are increasingly reluctant to spend money they haven`t actually got in their hands,” said Mr Robertson. This is the key point: although plastic’s convenient, old-fashioned cash can make budgeting easier. With cash, checking what’s left of the household budget is just a matter of looking in the wallet / purse.

And there’s a world of difference between different kinds of plastic. With debit cards, people risk spending more of their household budget than they realise. But credit cards bring additional risks: unless they can pay off the balance quickly, it’s easy to get caught in a ‘debt spiral’. High interest rates can easily push credit card debt far beyond the initial amount borrowed, so repayments take a small but significant chunk out of the monthly budget for years to come.

Spending in the shops: biggest decline since 2005
So many households have decided the best way to control their budget is to spend real notes and coins, rather than figures on paper. But in itself, that’s not necessarily enough. Also published in April, the BRC-KMPG Retail Sales Monitor March 2008 reveals a drop in spending: UK retail sales fell by 1.6% on a like-for-like basis*.

“This is the first year-on-year fall in like-for-like sales for two years and the worst result for nearly three years,” said Mr Robertson. “Here is the strongest evidence yet that customers are making serious economies and are increasingly concerned about the future.”

Nobody enjoys ‘tightening their belt’, but it’s good to see people are coping with these expensive times by cutting back on household spending, rather than borrowing more. After all, there’s no point in someone just watching their budget unless they can adjust their spending habits when the situation calls for it.
  • ‘on a like-for-like basis’ – percentage change in the value of sales compared with the same period one year ago.
]]> http://www.gregorypennington.com/debt-management-features/974/cash-not-credit.asp Tue, 29 Apr 2008 10:1:43 GMT Banking on debt problems: what if my bank goes bust? is possible for banks to collapse.

So what happens to investors’ savings if a bank does go bust? Thanks to the Financial Services Compensation Scheme (FSCS), they WON’T lose all their money, no matter what debt problems the bank is facing.

The Financial Services Compensation Scheme
The FSCS protects customers of companies regulated by the Financial Services Authority (FSA). As the ‘fund of last resort’, it will compensate these people if the company cannot pay what it owes them (normally because it is ‘in default’ – i.e. it has stopped trading and its debts outweigh its assets, or it has been declared insolvent).

The compensation rules changed on 1 October 2007.
  • Before that date, if a company was declared in default, the FSCS would compensate 100% of someone’s deposit up to £2,000, then 90% of the next £33,000.
  • But now, if a company is declared in default, the FSCS will refund every penny of someone’s deposit all the way up to £35,000.

So if you have more than £35,000 in savings, it makes sense to keep it in two or more separate banks. If you split £70,000 between two banks, just make sure they don’t belong to the same ‘parent’ organisation – if they share the same FSA registration, they’ll only count as one institution, so you’ll only be compensated for £35,000 (not £70,000) if they collapse.

How can a bank collapse?
In today’s financial climate, consumers aren’t the only ones facing debt problems. Banks and building societies can have their own problems with debt. A common, regular feature of the banking world, borrowing in itself is nothing to worry about, but the funds available to banks are becoming more limited right now: borrowing too much can be dangerous for a bank, and so can lending too much.

Take mortgages for example. Any company offering mortgages is aware that its customers might default on their payments or even have their homes repossessed. Some of them have granted mortgages worth billions of pounds, but today – with so many people struggling against serious debt problems – they’re not sure how much they’re going to get back.

So if enough people have enough problems with debt, this could spell serious trouble for a bank. Today, the LIBOR rate (London InterBank Offer Rate – the rate at which banks borrow from each other) is almost 1% higher than the base rate, which the Bank of England has just reduced to 5%.

Now that the nation as a whole is facing problems with debt, banks are very careful about lending money to each other, as they’re not sure if they would be able to borrow more money!

]]> http://www.gregorypennington.com/debt-management-features/930/what-if-your-bank-goes-bust.asp Tue, 22 Apr 2008 10:51:35 GMT Debt problems - debt, taxes and the Budget
Before April 2008, the first £2,230 of someone`s taxable income was taxed at 10%, then the next £32,370 was taxed at 22% (see table). But now, everything up to £36,000 is taxed at 20%: losing the Starting rate means that people will pay twice as much on the first £2,230 they earn.

 
2007/2008
2008/2009
 
%
Taxable income
%
Taxable income
Starting rate
10
Up to £2,230
-
-
Basic rate
22
£2,231 to £34,600
20
Up to £36,000
Higher rate
40
Above £34,600
40
Above £36,000

In a nation where the average adult owes almost £5,000 in unsecured debt, any changes to someone`s income after tax could make a real difference to their efforts to tackle their debt problems. When they need all or most of their disposable income for debt repayments, even the smallest change could mean they need to look for debt help immediately.

Good news or bad news?
Overall, the changes could be good news or bad news, depending on how much you`re earning. For people on average or higher incomes, this was a good Budget. But according to the Commons Treasury Committee, some low-paid people could be around £20 per month worse off. Clearly, `finding` an extra £20 a month won’t be easy for people already struggling with their debt problems.

It seems £18,500 is the `break-even point` - the point at which people gain more from the lowering of the Basic rate than they lose from the abolition of the Starting rate. Of course, debt is a problem that affects rich and poor alike. Someone with a high salary and plenty of debt may be just as likely to need debt help as someone with less money and less debt. However, the two may well need different debt solutions: for example, the first person might consider an IVA (Individual Voluntary Arrangement), while the second could be better off looking into debt management.

Tax credits – the answer to debt problems?
Many people are unhappy with the government`s claim that a more generous tax credit system should make up for any loss. Why, they say, should they have to claim benefits to replace money they`ve paid in tax? While they’re waiting for their extra tax credits to come through, they`ll be struggling to keep up with debt problems that were already stretching their finances to the limit before their disposable income dropped.

Besides, many people don`t know what they`re entitled to, or don’t claim for it - and when the tax system assumes that people will make use of the tax credit system, anyone with debt problems who doesn`t take full advantage of it could soon find their financial situation going from bad to worse.

]]> http://www.gregorypennington.com/debt-management-features/908/debt-problems-and-the-budget.asp Fri, 11 Apr 2008 15:57:48 GMT Retiring in debt: spare time but no spare cash
Whatever their attitude, most people approaching retirement know it’ll mean a reduction in income. But on top of this ‘traditional’ drop in salary, today’s older workers face a new problem which wasn’t really an issue when their parents and grandparents retired.

A study* by Help the Aged and Barclays has revealed that 1 in 4 people approaching state retirement age still have outstanding consumer credit commitments – and that the average borrower in their late 50s / early 60s has four times as much unsecured debt as someone in that group ten years ago. It seems today’s older workers are far more likely to need debt help before they retire, or even after.

Pensioner poverty
Levels of debt may be increasing in every age group, but younger people simply have more time to pay it off before they retire. As long as repayments don’t stretch their finances too far, their debts aren’t necessarily a problem.

In the past, most people have managed to pay off all or most of their debt before they come close to retiring. But today, more and more people come to the end of their working lives in financial difficulty and end up retiring in debt, struggling to manage their debts on a reduced, fixed income.

Understandably, Help the Aged is concerned about the impact of debt on older people: “This report shows that there are some worrying trends in credit usage that could represent a debt crisis for those coming up to retirement,” said David Sinclair, Help the Aged head of policy. “We know from working with older people suffering from chronic debt problems that even owing a relatively small amount of money can cause untold misery for those living on a fixed income.”

The study also found that:
  • Debts may already be forcing people to delay their retirement.
  • Older people use credit cards to cover essentials such as bills or even food.
  • Many households headed by an older person are still repaying their mortgage:
    • 1 in 2 households headed by someone in their 50s,
    • 1 in 8 households headed by someone in their 60s, and
    • 1 in 25 households headed by someone aged 80-84.
  • For people in their 50s-60s, arrears on credit commitments are most common
  • For people aged 70 or over, utility bills are the main area of financial difficulty.

* The research was commissioned to support the work of Your Money Matters, a nationwide money management programme run by Help the Aged in partnership with Barclays.

Offering older people free, impartial money management and debt advice, the programme aims to:

  • improve older people’s knowledge, skills and confidence to manage their money,
  • provide practical, individual assistance to older people to overcome money management and debt problems, and
  • raise awareness of the issues of older people, debt and money management.
]]> http://www.gregorypennington.com/debt-management-features/895/retiring-in-debt.asp Fri, 4 Apr 2008 16:31:51 GMT Mortgages, banks and interest rates
But for most of us, buying a house is something we’ll only do a few times in our lives, so there’s no way we can follow all the pros and cons of the different mortgages on offer. Online comparison sites and similar publications are useful, but it’s often much simpler and much better to go to the experts (mortgage brokers/advisers), explain your situation and see what they recommend.

Before you do that, however, here are a few interesting things to think about...

The base rate
The base rate set by the Bank of England (BoE) is the ‘benchmark’ for interest rates throughout the UK. It’s never a good idea to choose a mortgage until you understand where the base rate is headed – and how this can affect your payments.
  • In July 2007, the base rate reached 5.75%.
  • Today, it’s down to 5.25%.
  • Many experts expect it to drop below 5% by the end of 2008.

But the base rate can change rapidly and unexpectedly – once, in 1985, it leapt from 9.5% to 13.88% in about two weeks. Even though that was in response to highly unusual conditions, it shows that it can happen.

How does the base rate affect mortgages?
In theory, when the rate goes up or down, so does the cost of some loans and mortgages (but not all – see below). So in 1985, some homeowners saw their mortgage payments shoot up around 40% almost overnight.

But banks aren’t always obliged to follow suit. If the base rate drops by 0.25%, for example, a bank might reduce the cost of some mortgages by the same amount. This is a good way to attract customers, but that’s not always their top priority. If they’re more concerned about protecting their cash reserves, they might reduce their own interest rates by 0.20%, or 0.10% – or nothing at all.

Fixed rate, Variable rate and Tracker mortgages
In terms of interest, there are three basic kinds of mortgage – Fixed rate, Variable rate and Tracker – and each has a different relationship to the BoE’s base rate.

The simplest of these is the Fixed rate. As the name indicates, the interest rate you sign up to at the start of the mortgage will remain fixed for an agreed time, after which you’ll probably start paying the Variable rate (or choose a new mortgage). A Fixed rate mortgage provides the stability that many people need, whether they’re paying off debts through a debt management plan, saving for the future or simply on a tight budget.

With Tracker mortgages and Variable rate mortgages, the rate you pay will change over time. The difference is that Tracker mortgages automatically follow the changes in the BoE’s base rate, while Variable rate mortgages only follow at the banks’ discretion.

So when people think the base rate is on the way up, a Fixed rate makes sense. 77% of the mortgage deals last June / July were Fixed, according to the Council of Mortgage Lenders (CML).

But today, with the base rate expected to keep dropping, Tracker mortgages are becoming more popular – the CML reports that only 57% of January’s mortgage deals were Fixed.

Which mortgage is right for you?
It all depends on your situation: not just what you owe and what you earn, but how stable your circumstances are and how much risk you can handle.

If you can make your mortgage payments quite comfortably, you might choose a Tracker mortgage, so you can benefit from the base rate cuts the experts are predicting.

If, on the other hand, buying a house is really stretching your finances, it might make sense to look at a Fixed rate mortgage. It might be irritating to miss out on the expected base rate cuts, but what would you do if the experts turned out to be wrong? If your mortgage payments suddenly jumped by 10% or 15%, would you be able to cope, or would you find yourself seeking immediate debt help to stop your house being repossessed?

]]> http://www.gregorypennington.com/debt-management-features/882/finding-the-right-mortgage-deal.asp Fri, 28 Mar 2008 13:22:19 GMT