Debt Restructure
How can I restructure my debts?
The key to sorting out your borrowing problems is a straight forward three-step approach:
1. Work out the scale of the problem;
2. Draw up your budget; and
3. Don't let matters slide - seek help where you need it.
Work out the scale of the problem
In order to work out the scale of the problem, make a list of all your borrowing - don't forget to include unpaid bills, loans from family and friends and money owed on credit cards, store cards and catalogues.
Prioritise your debts
It is important to prioritise your debts, establishing the most important ones to clear first.
The list below gives you a general guide to the order of priority, but it may not be appropriate in every case. Also this is not a complete list and further advice should be sought.
In most cases creditors will agree to a monthly repayment to their arrears before they take any action, so it is important to deal with these debts as quickly as possible.
Mortgage (and other loans secured against your home) or rent
Council tax
Gas and electricity
Water
Tax or VAT arrears
Business debts
Hire purchase
Magistrates' Court fines
TV license
Maintenance to support a former partner or children
Loans from family and friends
Social Fund Loans, benefit overpayments
Unlicensed lenders
Store cards, credit cards and personal loans
Ignoring any of these debts can have serious consequences and you might feel you need assistance with all of this. That's where we can help you.
Below you will find some possible solutions (not in order of preference)
- If you own your home, you could consider re-mortgaging to an alternative mortgage lender or take a further advance from your current lender. The purpose of this would be to consolidate any unsecured loans you have. Any unsecured borrowing you have will typically be incurring a much higher APR than a secured mortgage loan rate. As independent Mortgage and Financial advisers we can assist in this area, searching the market to ensure you secure the best rates on offer.
- Restructure your unsecured loans, with one consolidation loan at lower rates, to bring together all your unsecured borrowing.
- If your debts / income / assets do not indicate that a re-mortgage or fresh unsecured consolidation loan would suit then an IVA / Bankruptcy may be your only answer.
Unable to manage
If you feel your debts aren't manageable, or you are not earning, or a property owner, you may need to contact other organisations such as Citizens Advice Bureau
Citizens Advice - an online CAB service that provides independent advice on your rights.
Looking forward
What if your circumstances change?
Even if you are managing your borrowing at the moment, bear in mind that this can change if your circumstances alter. For example:
relationship breakdown
long term sickness or disability
unemployment or redundancy
starting a family
bereavement
And other events outside your control - such as a rise in interest rates or the cost of living - can affect your ability to manage your debts. For help on what to do if these things happen to you, contact us.
Preventing problems
Prevention is better than cure. With this in mind there are some things which you might be able to do now to help prevent borrowing problems in the future - for example, building up an emergency fund or taking out some insurance. contact us.
Thinking of borrowing more?
How much is too much? Just because someone will lend you money, that doesn't necessarily mean you can afford to borrow it!
Think carefully before you take on any new borrowing. Make sure that you will be able to manage the repayments and think about what would happen if your circumstances changed. See the links below.
For pointers on what to think about before you take on any new borrowing, contact us
If you are having problems with your borrowing you might have considered taking out a consolidation loan (a single loan to replace your other debts).
Making the most of your money
Whatever your situation, it makes sense to do what you can to make the most of your money and to improve your situation. For example:
always shop around for financial products and services, utility bills and other purchases
see if you can reduce your spending
you may be entitled to more benefits and tax credits than you are currently claiming
For some ideas on what you could do, take a look at the link below:
Getting Help
It can be hard to sort out debt problems on your own, even with plenty of guidance on where to start and what to do. But there are lots of organisations willing to help you and you will find more details about them via the link below:
Credit repair: if you've had problems with debt but you're now getting yourself sorted out, you might think about trying to repair your credit history.
Even if you're coping with your borrowing at the moment and you're not planning to take out any new loans, it's a good idea to review your current borrowing from time to time.
If you want to look more generally at your finances, see the FSA's Financial Healthcheck.
Finally
If your circumstances change, try the Debt test again to get information and help which is relevant to your new situation.