More people are still using short-term credit card debt as an answer to their financial problems when instead they should be looking to long-term solutions.

The latest Bank of England figures showed that borrowers owed a combined £61.5bn to credit card companies in January. That’s an increase of £300m in just a month.

But how can you get out of the cycle? Every month the repayment rate is high, your other debts and responsibilities do not go away and there is never enough money to begin really getting on top of the credit cards.

That’s why you need to consider a secured loan if you are struggling to handle the credit card debt. By consolidating the debt onto your mortgage you exchange double-digit rates for single digit rates, and you take the pressure off the rest of your finances. That allows you to pay down any other debts you may have and gives you space to save money for the long term.

A spokesperson for debt management company Gregory Pennington said: “Credit card debt is a growing problem for many people, and it`s vital that anyone struggling to repay their debts seeks independent debt advice.”

SOURCE: Gregory Pennington, BoE, 05/03/10

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Some people spend all their lives managing debts, but it needn’t have to be that way – with the help of a professional adviser you can clear that debt and start saving instead of spending.

Credit card debt in particular is very expensive to manage. According to Defaqto, with a typical APR and minimum payment plan to pay off a £1,000 credit card balance would take nearly 15 years at 9.9%, 21 years at 15.9% and more than 37 years if the rate was at 20.9%.

David Black, banking specialist at Defaqto, says: “The dangers of making low minimum repayments cannot be emphasised enough. Someone making a minimum 2% monthly repayment on a £1,000 balance on a credit card charging 20.9% APR would take 37 years one month to clear the balance.”

It doesn’t help that many credit cards demand you pay off the cheapest purchases first, leaving the bigger, more expensive payments stuck on the card – simply, there is no upside to credit card debt.

So get out of the credit card debt cycle and talk to a professional adviser about moving all your debts onto a secured loan. By using your home’s equity you can be free of the burden of debts with huge repayment rates and instead enjoy one, affordable rate that will give you the time and the space to finally save instead of just spend.

SOURCE: Defaqto, 18/03/10

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No one wants to bring debt with them into their old age so if you think you’ll be paying back your credit cards forever, talk to a mortgage adviser about using some of your home’s equity to clear the debt for good.

There are still many people entering into retirement with hefty credit card debt – in fact, one in five over-65’s owe money on their credit cards with average debt of £8,967, says Key Retirement Solutions.

Its analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000. That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.

But using some of your home’s equity could cancel out that debt and save you a fortune in your retirement. And there more than enough equity to do this – KRS says the over-65s have property wealth of around £765.2bn after paying off mortgages and gaining from increases in house prices.

Dean Mirfin, business development director at KRS, says: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.

“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”

SOURCE: KRS, 16/03/10

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If you feel like your finances are on a knife edge and that any loss of earnings or any added financial burden would send you over edge, then you need to consolidate the debts before it is too late.

According to Callcredit, one in four people between 35 and 44 years say that a drop of just £300 in monthly income would cause them to default on their mortgage payment. This is simply not enough of a cushion and means millions of Brits are up to their necks in debt.

The research also showed a noticeable reduction in the proportion of people paying off their credit card bills in full each month with one in twenty people who previously paid their bills in full now paying just the minimum or a fixed amount.

Graham Lund, managing director of Callcredit says: “These statistics are extremely alarming. A significant proportion of people, many of who may have families to support, are living on a financial precipice, where just one negative event, such as a reduction in paid overtime or an unexpected expense could have disastrous financial consequences.”

If you are on the edge, talk to a mortgage professional. They can help you find ways to use your home to ease your burden – by consolidating your debts into your home’s equity then you can give yourself some room to pay off credit card and personal loan debt rather than just manage it. You can also give yourself a bigger buffer than £300, so if something does happen, you can be safe in the knowledge that your finances will remain stable.

SOURCE: CallCredit, 12/03/10

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If you do not take control of your debts and take a proactive approach to your problems then you may be a slave to your debts for ten years.

According to insolvency body R3, a quarter of debt management plans will last ten years or more, even though the plans are meant to be a short-term repayment plan between an individual and their creditors.

Peter Sargent president of R3 says: “Debt plans can play an important role in offering a manageable solution to individuals who are able to pay back their debts. However, the sheer length of some plans indicates that the amount of debt these individuals have is too large – these inappropriately lengthy plans people become slaves to their debts.”

Having to bow down to debt for years is not the answer – it might mean a decade of no credit and no hope. But by consolidating your debts into one manageable secured loan you could avoid the years of pain. One low payment means room to pay off debt rather than just manage it and it means a better financial life.

Talk to a mortgage adviser about avoiding debt slavery and instead be free of your debt burdens with a sensible, manageable secured loan.

SOURCE: R3, 05/03/10

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Even during a extended period of the lowest base rate ever it seems as though lenders are unhappy to offer borrowers unsecured personal loans without a high premium.

One year ago this month the Bank of England ended six months of dramatic rate cuts to try and stave off the effects of the recession, leaving base rate at a record low of 0.5% but that hasn’t stopped personal loan rates rocketing.

According to Moneysupermarket.com, the best £3,000 loan over five years has risen by a massive 1.25% on average, to 14.92% over the last year, which is more than double the average rate of 2007. The best £5,000 loan over the same period has also risen on average to 9.08% from 8.88%.

Tim Moss, head of loans at moneysupermarket.com, says: “There was a time that a personal loan was the perfect solution for anyone looking to borrow to buy a car or consolidate existing debts. But the personal loan market has changed beyond all recognition with rates shooting up and borrowing for relatively small amounts becoming uneconomical. The last twelve months has not been kind to borrowers looking for a personal loan and there is little sign of this changing in the near future.”

In the past it was personal loans people turned to when looking to consolidate debt or find some extra money. Now people have to consider secured loans instead – lenders are a lot happier to lend on properties that are rising in value than to people without security. Talk to a mortgage lender about using your home to raise the cash that you need.

SOURCE: Moneysupermarket.com, 04/03/10

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There is no doubt about it – if you do not cover yourself against what could happen there is no guarantee that you and your family would keep your home should you get ill or even die.

New research by Friends Provident has found that nearly half of people in the UK have no insurance in place to cover loss of income through illness or death of a breadwinner and even those that have considered taking some action would be underinsured by an average of £14,500 per year.

Not being able to pay the bills means you could default on your secured loan repayments and your mortgage repayments. This could eventually lead to the lenders taking your home – all because you were not covered in the case of a loss of earnings.

Alarmingly, a third of people told Friends Provident they could live on less than 35% of their take home pay if they were unable to work through illness or injury. Based on an average weekly income of £489, that means they would have a maximum income of £171 per week – not enough to pay the bills and to be sure you and your family are safe.

Ed Stuart-Brown, head of protection sales at Friends Provident says: “Imagine being told that you had just been given a 66% cut in your income – the impact of that for most people would be catastrophic. It’s time people took control of their future and looked at this in a responsible way, instead of burying their heads in the sand, especially in today’s environment. Ignorance is not bliss, it’s irresponsible.

“It’s a sad fact of life that the unthinkable can and does happen and the last thing you would want is to leave yourself or your family in dire financial straits. And it’s too late to do anything about it once illness, accident or death occurs. If you are fit and well now is the time to act – the cost for most people is a fraction of the potential benefits they could receive and it’s a simple matter to review your needs with your adviser.”

SOURCE: Friends Provident, 02/03/10

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One of the biggest problems people with multiple debts face is being able to actually pay off the debt while managing the interest – indebted borrowers don’t have the freedom to pay off their debts.

Car loans, personal loans, mortgages, credit cards and store cards on top of all of the other bills life throws you mean you do not have much money to actually save and pay off the debt – many Brits are therefore doomed to a life of continuing debt.

If you can manage the demands each month this isn’t necessarily a problem, but if you suffer a loss of earnings or are hit by an unexpected payment then you may find you miss a payment on one of your debts and then you could be in real trouble. One missed payment means a fine, a penalty charge or an increase of a rate – then all your debts are at risk as your outgoings suddenly increase.

The only way to solve the problem is to get some space and time to be able to save money and actually work off your debts. That can only be done by consolidating your debts into one, affordable loan – a secured loan.

By using your home’s equity to consolidate debts you reduce the number of interest rates you have to service considerably – and because the one debt is secure, that rate is lower. So from many high rate payments to one, low payment means you have room to save and pay down the secured loan in good time and you reduce the chance of losing control of your finances.

So if you feel like your debts don’t give you room to breathe, talk to a mortgage adviser about using your home to give yourself some freedom.

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They have certainly gone out of fashion over the last two years, but secured loans are still a valuable, viable option for plenty of homeowners looking to safely control their debts.

A secured loan is a loan on top of your mortgage, sometimes called a second mortgage. In the past they were commonplace and many people took them out while credit was cheap and spending was easy.

But now, in the wake of the deepest recession in modern times, secured loan lending has all but stopped. Most lenders thought it too risky to offer people even more credit on top of what they already had to handle debts. Also, many people became repossessed or at least got into financial difficulties thanks to having an extra loan on top of their mortgage.

But things have changed in two years. People are much more realisitic about borrowing, less people are spending beyond their means and more people want to get serious and sensible about their debt management.

That’s why secured loans are still a viable option. There are still lenders out there who will happily lend to people who want to use the financial products to consolidate their unsecured debts and have a plan to pay off the secured loan in a timely manner.

But those lenders will only offer people a second mortgage if they have a water-tight plan. They will only lend to them if their application is impeccable and they will only lend after the borrower has spoken to a mortgage expert. In the wake of the financial crisis, the watchword is caution and safety, but if you can prove both then a secured loan lender may be happy to help you consolidate your debts and safely manage your money.

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Many people who fall into bankruptcy and repossession are proven to have unsecured debts like credit cards and store cards – risky unsecured expensive debt can be the end for some people.

A survey by insolvency practitioners R3 shows that 66% of those who deal with bankruptcies and insolvencies have dealt with cases where people have signed up for a store card without understanding what they had let themselves in for – nearly 80% of insolvency practitioners believe that consumers view spending on store cards as less ‘real’ than spending in cash and so unwittingly go over budget.

Unsecured debt like store cards is bad for so many reasons. It was designed to make people spend way beyond their means, it doesn’t often show the real rate of repayment people will be saddled with after a spending spree, and it only adds to a person’s negative credit score – the more unsecured debt someone amasses the less chance they have of securing good debt like a mortgage in the future.

Peter Sargent, president of R3 says: “Offering store credit at the point of sale means that many vulnerable consumers do not grasp that they are entering into a legally binding contract. Store cards must be handled just like any other credit card. This advice guide was designed to make consumers stop and think. We can’t stop people from using store cards but we can show them how to make sure the store card works for them.”

If your store cards are too much for you, talk to a professional mortgage adviser about moving your risky debt onto your mortgage. By consolidating debt you may find that your outgoings shrink, your worries diminish and you have the chance to finally pay off debt instead of massing it.

SOURCE: R3, 23/02/10

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