Peter Payack Finance

If you are struggling with unmanageable debts, don’t panic - you may have several options.

You may feel that you’ve reached ‘the end of the line’, and that you’ll never be able to repay your debts… but there may well be a solution to your problems.

Take a look at the two solutions described below - one of them may be your route out of debt.

Debt management plan

A debt management plan may be suitable for you if you can’t afford to keep up with the repayments to your unsecured debts as you had originally agreed, but you can repay your debts within a reasonable period of time (under different terms, however).

In simple terms, a debt management plan works by asking your lenders to accept changes to the repayment plan. If they believe accepting these changes is the best way forward, they may agree to lower monthly payments and a freeze/reduction in interest and charges.

Just be aware that repaying any debt more slowly can damage your credit rating, since you’re not sticking to the repayment plan you originally signed up to. You should speak with a professional debt adviser about all your options before entering a debt management plan.

IVA

An IVA (Individual Voluntary Arrangement), on the other hand, may be suitable for you if you are struggling with an unmanageable level of unsecured debt that you can’t afford to repay, but that you can commit to making regular reduced monthly payments towards.

An IVA will - in most cases - last for five years, and is a legally binding debt solution. Once your IVA draws to a successful close (i.e. assuming you’ve done everything you were required to), your creditors will write off any remaining unsecured debt.

Just bear in mind that it’ll have an impact on your credit rating - and if you own your home, you’ll probably have to release equity from it so you can repay more of your debt.

To find out if you’re eligible for an IVA, you’ll need to seek IVA advice (Individual Voluntary Arrangement advice). By seeking IVA advice, you’ll be able to have a professional debt adviser take a look at your situation and let you know what they believe is the most suitable way forward - whether it’s entering an IVA or not.

Deciding on the best rewards cards depends on what is the most rewarding to you.  Rewards include cash back options, travel points, travel insurance, donations to sports teams, colleges, and charities.

Here are some of top rewards cards in Ireland:

• MBNA’s new Pigsback.com credit card. With 0% APR on balance transfers for 10 months and 2,000 PiggyPoints after your first card purchase, it’s pretty great. The APR isn’t bad either (14.9 % APR when this went into print). As for your reward? You get 1 PiggyPoint for every 2 Euros you spend on card purchases! It really does fair high on my list of best credit card deals in Ireland.
• SonyCard. For every € 1.5 you charge on the card, you receive one “pulsebeat.” You can get stuff free by using your pulsebeats. Sony offers over 600 products available for purchase with pulsebeats.
• Tesco’s Clubcard Credit Card. This card gets you one point for every €4 you spend. Sometimes it’s double points, but bear in mind each point is worth about only around 4cents when you redeem them. You can spend your points at Tesco stores or petrol stations. You can also use the clubcard vouchers as airmiles
• Sainsbury Credit Card. This card gives you two Nectar points for every €1 you spend in Sainsbury (for the first two years you hold the card). When you use the card elsewhere, you get one Nectar point for every €5 you spend. Each nectar point equals 0.5cents. You can use your vouchers at Sainsburys and Argos. You can also use them at certain restaurants, video stores, cinema tickets, and for airplane tickets.
• Play.com credit cards lets you earn points for spending at play.com and elsewhere. You get two playpoints for each €1 you spend at play.com. If you use your card elsewhere, you receive one playpoint for each €1. Five hundred playpoints equal €5. You can redeem your points at Play.com where you can buy DVDs, music, games, books, computers, electronics, and gadgets.
• Ulster Bank credit cards also offer YourPoints. But you only receive one point for every € 1 you spend. You can use YourPoints to make travel arrangements and you can get shopping vouchers for them.

Debt management company Gregory Pennington have warned that the economy remains uncertain, despite a number of signals suggesting a potential recovery, and have advised anyone facing severe financial problems to seek professional debt advice as soon as possible.

The Bank of England Monetary Policy Committee’s announcement on Wednesday that the base rate would fall to 4.5% was intended to calm fears surrounding the money market and increase lenders’ willingness to do business with one another, subsequently increasing liquidity and boosting the loans market.

A number of lenders announced cuts to their mortgage rates following the base rate announcement – which may come as a relief to prospective homeowners or existing homeowners looking to remortgage, following many lenders’ reluctance to respond to the last base rate drop.

Meanwhile, petrol prices recently fell to as little as 103.9 pence per litre, while food price growth slowed by 0.2% in September, according to the British Retail Consortium (BRC) – arousing speculation that overall inflation has hit its peak and will now begin to slow.

However, a spokesperson for Gregory Pennington commented that while there are encouraging signs for the economy, there is no guarantee that further difficulty for the economy can be avoided.

“The first thing to bear in mind is that while the base rate cut is intended to help the economy, it was brought in as an emergency measure,” she said. “The threat of a severe economic downturn is still looming and there are no guarantees it can be avoided.

“The fall in oil and food prices are very encouraging, but both are heavily affected by external factors, largely outside our Government’s control.”

The debt management company spokesperson was keen to emphasise the continued need to take care over finances and manage debts effectively in the coming months. “There is still the possibility that things could get tighter in the near future, so it pays to tackle any financial issues now, rather than waiting to see what happens next.

“People who are struggling with debt are especially at risk, because their finances are already stretched – and any further rises in costs of living could make those debts unmanageable.

“As always, we advise anyone struggling with debt to seek expert debt help as soon as possible. Leaving it too late could allow your debts to grow, which is particularly dangerous if costs of living do continue to rise.

“There are a number of debt solutions to help with various financial situations. A debt management plan is a flexible means of getting out of debt in which your repayments are based on how much you can afford, and in some cases interest and other charges can be frozen.

“Debt consolidation involves grouping your debts into one convenient monthly payment, therefore simplifying your finances, and your debt can also be spread out over a longer period of time, meaning monthly payments are smaller – although this can mean you pay more interest in the long run.

“For more serious debts of over £15,000, an IVA (Individual Voluntary Arrangement) might be more appropriate. These work by agreeing with your creditors to make payments based on what you can afford for a period of five years, after which the remaining debt is considered settled.”

Not having insurance could leave those consumers on low incomes at greater financial risk, it has been suggested. The news comes as research carried out by the Association of British Insurers (ABI) reveals that just over a third of people (35 per cent) living in low-income homes - those households which earn less than 10,000 pounds per year - do not have any form of insurance.

And with the firm suggesting that such consumers are more at risk from crime, flooding and fire than their higher-earning peers, not taking out cover may see them struggle more to meet demands on their finances such as utility bills and personal loan repayments. In addition, the ABI revealed that 44 per cent of the poorest households have purchased home contents insurance, in comparison to the 82 per cent of Britons on median incomes (earning between 15,000 pounds and 30,000 pounds) who have the product. Overall, a third of people on low incomes have motor cover, while only a quarter have taken out life insurance.

Research from the association also showed that those consumers with an annual income of less than 5,000 pounds are 71 per cent more likely to have their homes burgled at least once, in comparison to households earning at least 30,000 pounds. Meanwhile, arson rates are some 30 times higher among people living in the most deprived communities. It was also suggested that consumers making the least amount of money per year are more susceptible to flooding. Speaking at a seminar on financial inclusion and insurance, Stephen Haddrill, director general of the ABI, said: “Insurance provides valuable protection to people on all income levels. The poor are least able to deal with financial loss and depend most on insurance. We need to address the issue of low take-up in low-income groups.

A lack of spare cash is the biggest factor holding back the purchase of insurance by lower income households.” The association also asserted that when those on low incomes and who are without insurance have items either damaged or stolen, they have to meet the costs of replacing such goods themselves, which in turn may put pressure on their day-to-day money management. Consequently, a third of such consumers are shown to borrow, whether this be through a secured loan, credit card or other means, in a bid to meet such costs and in turn are “increasing their indebtedness”. As a result, for those consumers looking to replace damaged goods or to get repairs on their property carried out, applying for a personal loan could be an effective way of meeting such costs. In addition, taking out a loan could also help consumers organize their finances and free up disposable income, as they could be able to pay off various debts quickly - potentially leaving them more money to buy a sufficient insurance policy.

Earlier this year, Chris Tap, associate director of Credit Action, stated that by taking the time each month to review their finances, consumers will be able to identify where their money goes and so could make payments on personal loans and other types of credit with greater efficiency.

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Lawrence Yun, NAR chief economist, said first-time home buyers are
critical to the health of the housing market. “About four in 10 homes are
purchased by first-time buyers, which frees existing owners to trade up,”
Yun said. “With many potential first-time home buyers on the sidelines, a
first-time buyer tax credit would have a significant positive impact on
both housing and the economy. Combined with permanent increases to mortgage
loan limits and enhancing the FHA loan program, the housing stimulus
package working its way through Congress would go a long way toward helping
consumers and boosting the overall economy.”

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