debt consolidation accounts

johnny_wish · 26 November 2013 at 5:55PM

Hi everyone,

this is my first time and im in desperate need of help.

I have been desperate to sort my debts of £25000 out but I have found my income going down and down. Can any one tell me what debt consolidation accounts are all about and are they any different from IVAs.

What is the best company to approach or is there anything a person can do for themselves

Tixy · 26 November 2013 at 6:01PM

Hi and welcome to the forum

If you are having problems with repaying your debts the best place to approach first is one of the debt advice charities. They will give you free impartial advice on all your options.
See this link
IMPORTANT - Where to seek professional impartial advice about your debts.

Be very wary of companies who contact you and say they can help you - those type of companies are out to make a lot of money out of 'helping' you with your debts.

Debt consolidation is borrowing a large sum from another place and using that to repay your other debts. Then you repay the new lender over a period of time (plus interest of course).

Some companies describe debt management plans as like debt consolidation - but they are very different things.

bargainbetty · 26 November 2013 at 6:44PM

Please ensure that you do not go to a company that charges a fee. The proper ones do it for free, and will ensure that you have the best support.

Good luck

National_Debtline · 26 November 2013 at 7:00PM

Hello there.

Here's an overview about you possible options:

The first thing to do is to make yourself aware of all of your debts. Compile a comprehensive list and work out how much you owe in total. One of the key reasons for doing this is to ensure you choose the most appropriate route forward to meet your needs.

The next step is arguably the most important of all. You should complete an accurate financial statement. Some call this a personal budget, some an income & expenditure form. Before you consider what you might be able to offer your creditors you should ensure that you have enough money to meet your essential outgoings such as housing costs, bills, housekeeping and travelling costs. You can see an example financial statement on our website: http://www.nationaldebtline.co.uk/england_wales/pdf/personal-budget-sheet/your-personal-budget-sheet.pdf

The financial statement needs to be realistic, it’s important to ensure you have enough money to live on until you next get paid. The aim is that you will never need to borrow again. The figures do need to be reasonable, creditors may reject a budget if some of your outgoings are too high. There are general guideline figures, some of which you can see on page 18 of our self-help pack: http://www.nationaldebtline.co.uk/england_wales/pdf/self-help-pack/step-2-working-out-your-personal-budget.pdf

The aim of the budget is to help you calculate how much money you have left once you have accounted for your essential outgoings. The money you have left is called your ‘surplus’. This is the amount you can then offer to your creditors.
We have a very useful online advice tool called My Money Steps. It can help you create you financial statement and can also provide you with tailored advice about the best options for you. Please take a look: http://www.mymoneysteps.org

We place debts into two general categories, priority and non-priority. In essence priority debts are those that if you do not pay would cause you to lose something. Typically they have an effect your property, liberty or utilities if not paid. Priority debts include mortgage/secured loan arrears, rent arrears, council tax arrears, gas/electricity arrears, hire-purchase arrears or any court fines. If you have priority debts it is vital to get arrangements in place with these before you look at making arrangements with credit debts such as loans, credit cards, overdrafts, payday loans and catalogues.

Credit debts are classed as non-priority debts. Non-priority creditors have limited options available to them when it comes to chasing payment. The main option they have is to ask for the money via telephone calls and letters, this is why they can often bombard you with their demands. As a worst-case scenario the creditors could consider using legal action to recover their money, this really should be used as a last resort. If you have a creditor that is threatening court action or if you receive court papers in the post it is important that you seek further advice straight away.

If you fall behind or miss payments on your debts it can have an effect on your credit score. Any marks on your file would stay on there for six years.
Once your budget is completed, any surplus income would be used to pay these non-priority debts. This figure should be divided up on a pro-rata basis amongst the creditors, this would mean that the people you owe the most to would get the largest share and whoever you owe the least to would get the smallest share.

If your budget sheet shows that you have very little or nothing remaining for your creditors, you should offer each creditor a token payment of £1 each per month.

If your budget sheet shows that you can meet your contractual minimum payments you should continue to do so. If you can overpay you should try and reduce the debt with the highest interest rate first, once that one has been cleared move on to the debt with the second highest interest rate – and so on.
On our website you can find some sample letters which can be used to write to the creditors asking them to accept the new payments and to freeze any interest and to stop any further charges being added. Always include a copy of your personal budget so the creditor can see they are being offered a reasonable amount. It may take a few attempts to get the creditors to agree.

It’s recommended that you contact your creditors in writing rather than via the telephone. Here are our sample letters: http://www.nationaldebtline.co.uk/england_wales/debt_advice.php#6

If you currently hold a bank account with someone you have a credit agreement or overdraft with you stop using it and open an account with a new "safe" bank or building society. Banks have the ability to remove money from current accounts to satisfy any arrears owing on credit agreements, a safe account would stop this from being possible and safeguards the income you receive.

There are various options that can help you deal with your debts, we have written a brief guide to them all here: http://www.nationaldebtline.co.uk/england_wales/page.php?page=35_options_for_dealing_with_your_debts

The guide outlines the benefits and implications of all options. It is important to research all possible routes forward to help you arrive at an informed decision about the best way for yourself. Do ask as many questions and research as much as you can. Never feel rushed in to making any important decisions.

Best wishes,

David @ NDL.

debt consolidation accounts

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