How to be Debt Free in 6 Easy Steps!

A debt free is life not unattainable. It may seem an impossible and frightening task but it is possible. It requires patience and discipline determination and time. Given below is a run down of 6 steps that will help you in the journey towards a life that is free of financial stress.

Step 1 – Admit that you are facing problems in
managing your finances.The first step towards debt
free life is to come to terms with the fact that your
debts have become unmanageable. Leaving bills unpaid
and ignoring the problem does nothing to wipe off your
existing debts. It only makes the situation worse.
However the fact that you’re reading this article means
you have accepted that you are in debt and you are ready
to take the next step.

Step 2 – Take an honest look at your present financial
situation. Make a list of your debts. Next to the listed
debts include the name of the creditor,the total amount
you owe, the rate of interest you are being charged and
the monthly payment you make towards this debt, if any.
It will not only give you a clear picture of your
financial standing but will also help you in choosing
an appropriate debt solution.

Step 3 – Prioritize!
Decide which bills to pay first and which ones can wait.
Concentrate on paying off the debts that have a higher
interest rate. You will save more money in the long run
by ridding yourself of these expensive loans first while
keeping up the required repayments on the others.When
making the repayment remember to pay a little more than
the minimum as minimum debt repayments only covers the
added interest. It makes no impact on the capital amount.

Step 4 – Create a realistic monthly budget for your
outgoings. List all the essential expenses and
non essential expenditures.
The non essential expenditures can be completely
cut or lowered substantially until you become
debt-free. Evaluate your monthly balance by
subtracting monthly expenses from your monthly income.
This will tell you how much money you have at the
end of the month so that you can start paying off
your debts. Do not forget to keep some money aside
for unexpected expenses. As your debt goes down,
you will see a fall in your interest charges.

Step 5 – Refuse to take on any kind of new debt.
As you already in are in debt, adding
on a new debt will increase your debt and
will hinder your progress towards being debt free.
You must decide once and for all that you will
not add any new debt and stick to it!

Step 6 – If you are not able to manage your debts on
your own then you can opt for professional credit
counseling. You will be guided by financial experts
who will help you in taking a step nearer to a
debt free life. There are options you can take such
as taking out and IVA or even opting for Bancrupcy.
Recently there are companies who offer to write off
your credit cards legally.

Banks write off £100,000

The Guardian,
Article history by Rupert Jones

A “vulnerable” man earning £150 a week managed to rack up debts of more than £100,000 across nine personal loans in what his brother claims is the latest example of irresponsible bank lending.

The 50-year-old warehouseman has a poor understanding of financial matters and had no hope of ever repaying the loans, according to his older brother, Colin Griffiths.

Following Colin’s intervention, and the involvement of Guardian Money, all five lenders have now decided to write off the loans. One of them, Sainsbury’s Bank, says the loan application should not have been approved and steps have been taken to ensure this does not happen again. But others, such as Barclays Bank, say they lent the money based on inaccurate information provided by Douglas Griffiths about his income and outgoings.

The case coincides with a new study highlighting serious failures in banks’ lending practices. uSwitch.com, the online and phone-based comparison service that helps customers find a better deal, claims almost nine out of 10 credit card borrowers were issued cards without the lender checking that they could afford to repay the debt.

Late last summer, Colin discovered that Douglas, who lives in north London, had taken out a string of unsecured loans that he could not afford to repay. In all, he had borrowed around £70,000 between July 2002 and May 2005, saying that he needed the money for home improvements. This total is made up of:

· At least two loans – £7,000 and £15,000 – from Barclaycard. It appears the £15,000 loan was taken out to repay the £7,000 one, plus provide extra cash. Monthly repayment: £407.56.

· Two loans – £25,000 and £500 – from Barclays Bank. Monthly repayment (on the £25,000 loan): £481.48.

· Two loans – £7,000 and £12,000 – from Halifax. It appears the £12,000 loan was taken out to repay the £7,000 one, plus provide extra cash. Monthly repayment: £221.66.

· £7,500 from Sainsbury’s Bank. Monthly repayment: £191.81.

· £5,000 from Liverpool Victoria. Monthly repayment: £117.97.

· £5,000 from Tesco Personal Finance. Monthly repayment: £74.92.

With many of the lenders selling him payment protection insurance too, the total debt soared well over £100,000.

However, as many of the lenders pointed out, Douglas did not help his case by telling them he earned £400 a week. In fact, his take-home pay was £125 a week at the time and is now £150-£160.

Colin acknowledges his brother is at fault but says he is the victim of irresponsible lending because he was a vulnerable man who did not understand the implications. Furthermore, he says the lenders failed to verify his brother’s affairs to properly assess whether he was able to meet the repayments.

Colin is particularly critical of Barclays because Douglas has his current account with the bank, and therefore it would have been easy to see he could not afford more than £800 a month in loan repayments to the Barclays group.

“My older brother and I have done our best to look after him. It should be the institutions’ responsibility to protect people like Douglas as well, and they haven’t,” says Colin, 62, who lives near Milton Keynes. On being told that the lenders had agreed to wipe the debts, his reaction was: “What a relief!”

Douglas Griffiths says he accepts he lacks knowledge when it comes to financial matters and has found the whole experience distressing.

After Colin took up cudgels on behalf of his brother, and then Guardian Money got involved, things started to move fairly quickly. Sainsbury’s Bank – in a letter signed by Justin King, the boss of the supermarket group – moved swiftly to rectify the matter. It said the loan application was “processed incorrectly and therefore should not have been approved”, and added that the loan had been cancelled and wiped from Douglas’s credit file.

Tesco Personal Finance says it has written off the outstanding balance, adding that, as a responsible lender, “we take the circumstances of Mr Griffiths’ case very seriously”.

Liverpool Victoria says it has also decided to write off the debt on a goodwill basis, though adds: “Our staff followed absolutely the correct procedures.” It says it had no reason to ask for written proof of income because credit searches did not turn up anything untoward, and that it acted responsibly because it declined a request by Douglas to top up his £5,000 loan.

Meanwhile, the Halifax says it suspended the loan some weeks ago, which means no interest is accruing, and adds: “We will write this amount off.”

Barclays says it is committed to responsible lending, but this is dependent on the customer providing accurate information. “Having reviewed the sales of the loans to Mr Griffiths, Barclays found that Mr Griffiths overstated his income, underestimated his expenditure and understated the level of his existing debts. Had we been in full possession of the true facts, this would no doubt have affected our decision to lend,” says a spokesman.

He adds that Mr Griffiths appeared “confident and self-assured” during the application process, but says: “We are taking steps to write off the debts.”

What Should You Do If You Find Yourself In Serious Debt?

Debt

If you should find yourself in serious debt you may feel as though you are the only person in this situation. You may think that no-one else appears to be having your problems. But you are most definitely not alone! Over 2 million others are in exactly the same situation and usually through no fault of their own.

People get into debt for all sorts of reasons, including marriage break-ups, job loss or illness. Once you get into the situation where you owe more than you can afford to pay back, it can seem impossible to find a way out, but there are ways to get your head above and take back control of your life.
There are various sources of debt assistance open to you, and the best route to take will depend on your particular circumstances. Do NOT borrow more money to pay debts off unless you have seriously considered the alternatives available and decided that is the best course of action. With some assistance and advice you can assess your situation for yourself and perhaps put a plan in place that will not involve increasing your costs above what you already owe. Make sure any debt advice you get is unbiased and comes from someone who is not trying to sell you a service.

Never consider Debt Management Plans Individual Voluntary Arrangements, Consolidation Loans or (all of which will cost you money) Bankruptcy is the last resort. Go through the following steps yourself, which will help you get to grips with exactly the position you are in and what you may be able to do about it.

Step one – Write to your lenders
You can’t expect sympathy or understanding from the people you owe money to if they don’t know you are having difficulties. Write to all your creditors. Explain why you are having problems and get them to confirm the details of exactly what you owe them. Template letters are available online for guidance from the many consumer forums on line.

Step Two – Prioritize your Debt

This is VERY important. When you receive replies from your creditors, you must place them into one of two categories, Priority Creditors, or Secondary Creditors. The priority you give to them is about the consequences of not paying them. It is nothing to do with how snotty their letters are or how loud they shout, it is about what will happen to you if you don’t pay them first. These will include mortgages, secured loans and anything where not paying could result in the loss of your home, essential services or goods.

Step Three – Create a Budget Statement

In order to work out what you can afford to pay your creditors, you need to create a Financial Statement. This will not only tell you what you have left to pay people, but it will help to show your creditors, why you are not in a position to pay them at the usual rate. It is very important that you do NOT include your Secondary Creditors in this calculation, only your Priority ones. You must list all your income and all your expenditure for each month, which will show you what you have left to make repayments with.

Step Four – Make Offers of payment to Your Creditors

Now that you know how much you have left after making payments to your Priority Creditors, you need to work out what you are going to offer to your Secondary Creditors. The only way to be fair and consistent about this is to divide up your surplus income in proportion to the debts you owe. For example, imagine that your total debt is £10,000 and you owe Creditor A £5,000. This is 50% of your total debt, so Creditor A should be offered 50% of your available income each month. Write to each of your creditors and explain how much you can offer them. Ask them to accept this and waive any penalty charges.
Follow this step by step plan and you should be well on the way to managing your debt without looking at more costly methods.

The emotional and psychological effects of being in debt.

The economy is struggling to keep its head above water and everyone is feeling the effects. With very few options left, more and more people are turning to their credit cards to help keep them afloat in these troubling times. The problem with that is that eventually the personal debt piles up and, like weights tied to your ankles, slowly starts to pull you under.

But the damaging effects of being in debt go far beyond the material and digs deep into the emotional and psychological health of human beings. Studies have shown that being in debt does indeed take its toll on the emotional and psychological aspects of our lives. First, there is the very basic element of fear: the fear of losing one’s source of income and job, the fear of losing property such as one’s home or car, and the fear of one day being left with less than nothing and owing more than one can ever repay financially.

Areas around the world, especially in the UK, are feeling this fear more often every day. With the cost of living continually rising, it’s not difficult to understand how these fears come about. But that fear takes it toll on people in so many ways. You may start to have difficulty sleeping or maintaining any kind of focus. Stress becomes an everyday occurrence that gets harder and harder to deal with.

Many people are at risk of falling into a state of depression when they end up losing their jobs and simply cannot afford anything at all. This only multiplies the feelings of anxiety and depression to the point that serious medical help is needed. And it’s not just one person in the family who feels these pains. Every member is equally affected in some way.

Emotions such as anger and frustration take over and divide families that had once been much closer and happier. Feelings of hurt and resentment turn many people inward and, thus, they withdraw from their loved ones. This is becoming more common in places like the U.S.A, the UK and throughout Europe where economic debt has now seeped into the personal lives of their citizens and is causing a deep wound in the emotional and psychological lives of a large amount of the population.

The mental health concern is a serious one and needs to be addressed immediately. One way to prevent these ill effects is to address your economic situation regularly and reasonably. If you find any indication that there is the slightest build up of debt, with credit cards or otherwise, an immediate response is needed. Maybe your spending habits need to be cut, or it might be that you’ll have to make a tough choice of sacrificing property or materials that you enjoy but may not need. But believe it. Your emotional and psychological health is far more valuable and necessary than a burden that will weigh you down and ultimately cause more damage than it is worth.

If you have credit agreements taken out before April 2007 there is a new unenforceable credit agreement claim which is becoming more and more known about here in the UK.

It is possible to have your credit finance agreements –agreements such as credit cards, store cards, secured and unsecured loans, car finance agreements, and those with payment protection insurance ( PPI) ‘audited’. They may not comply with the terms of the 1974 Consumer Credit Act and if they do not they are unenforceable credit agreements. This means you can claim to have them written off. That is the balance completely cleared.

What cause us to get into Debt? The Possible Solutions?

Debt

The British people’s personal debt exceeds 1.1 trillion pounds. They have surpassed the United States in personal debt. Mortgage payments are the cause for 82% of this debt. The uncontrolled house price inflation is the main cause for this. Next an unusually high tax rate and over the top University fees are the main culprits. Some other sources of debt could be divorce, medical expenses, not planning well enough or being put on the dole from your job. One good thing to help the British people is new consumer protection laws capping credit card fees at twelve pounds down from thirty-eight pounds.

A solution for the Scottish people is what is known as a Scottish Trust Deed. This is an alternative to filing for bankruptcy. This is an agreement between you and your creditors for three years. At the end of the time period any remaining balance is written off. This trust deed is legally binding on all of your creditors. The terms of the deed are tailored to fit your situation. Another solution for the removal of debt is to consult a debt management agency. There are many offices out there who can give advice tailored for your situation. They can be found online or locally.

One solution they can give the British people is like the Scottish Deed. It is called an Individual Voluntary Arrangement. This is a formal agreement between you and your creditors for over sixty months. In that time, you pay them what you can afford. After that period is over, the remaining debt is written off. These arrangements can help reduce your debt by seventy percent. Creditors cannot call you once this arrangement has been put in place.

Another solution they can offer is Debt Management. This is like consolidation in the United States. This involves making one payment to the agency and they take care of the bills. In some cases, you can also freeze interest rates. You will not have any more contact with the creditors as the agency will do that for you.

The last solution they can offer you is a loan or to remortgage your home. The last resort to debt elimination is filing for bankruptcy. There are two types: voluntary and involuntary. You go to court yourself to file and the district judge decides whether to grant it or not. It costs four hundred and eighty five pounds to do this. The fee may be waived if you are poor or unemployed. Involuntary is when a creditor petitions the court for your bankruptcy if you owe more than seven hundred and fifty pounds. The advantages are: you are protected from creditors, your stress levels go down; after a year, the debt left over is written off and you’ll be able to make a fresh start. The disadvantages are: your assets will be sold to pay the debts. This can include your home.

The bankruptcy is put in the local paper for everyone to see. This will affect your credit rating for six years and it will prevent you from working in certain areas of employment. The best advice any debt manager will give you is try to keep your debt at or below twenty percent of your income level.

There is another solution.

If you have credit agreements taken out before April 2007 there is a new unenforceable credit agreement claim which is becoming more and more known about here in the UK. It is possible to have your credit finance agreements –agreements such as credit cards, store cards, secured and unsecured loans, car finance agreements, and those with payment protection insurance ( PPI) ‘audited’. They may not comply with the terms of the 1974 Consumer Credit Act and if they do not they are unenforceable credit agreements. This means you can claim to have them written off. That is the balance completely cleared. For NO FEES a solicitor with handle your claim. This is on a no-win-no-fee basis so it is risk free.

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