Managing financial concerns effectively

For any consumer who has faced an uncertain financial future, this can be a difficult and somewhat stressful time. Modern day consumers face more financial commitments than has probably ever seen before in our lifetimes and as such, there are times when mounting commitments become too much. Although as individuals we have a responsibility to ensure we do not purposely place ourselves in a position of financial difficulty, sometimes we unexpectedly find that this is in fact the point which has been reached. For any type of overdue financial commitment, it is vitally important it is managed correctly and certainly not simply ignored. Managing debt of any amount and size, can appear difficult or even scary but the reality is there are a number of different ways it can be tackled without having to feel like all possible recovery routes are entirely lost. Today then and with this in mind, let’s look at this in some greater detail and attempt to understand some of the options which could be considered.

The fact of the matter is when it comes to debt and missed repayments, it can be our desire to bury our heads in the sand and hope it will eventually go away. The reality of course is that it will not. When existing debts are ignored the matter can escalate and as such place us in a far worse situation. This really does apply to any form of contractual agreement as far as credit is concerned. Whether this is a monthly store card, mobile phone contract or hire purchase; the avoidance of debt will result in a number of different actions being taken by the creditor. The first of which in almost all possible of forms of credit is a ‘negative’ input against your Credit Reference File. A Credit Reference File stores all past and present credit based commitments for any given individual. There are several different Credit Reference Agencies who exist and depending on the credit provider, an entry will be made with any one or all of these agencies. The meaning of negative in this context is that they will report the lack of repayment on a monthly basis until such time that the account in question is deemed as defaulted. This action could restrict your ability to obtain credit in the future; should you later be in a position to manage it as required. As well as this, the creditor will often add a form of penalty to your account, whether this be in the form of a late charge or additional interest as a result of the lack of agreed repayment. This will be coupled with regular attempts to contact you, in an effort to resolve the matter, usually via all means available.

With all of the above in mind it is not surprising then that choosing effective routes to manage our debts will thankfully reduce the overall impact. The first step to take is always to contact the creditor in question and advise them of the reason why repayment cannot or has not been made. It is often believed that creditors do not wish to work with their debtors in cases of missed repayments but the truth could not be further from this this. Creditors want to maintain a relationship and will work with you to agree an alternative repayment agreement which is fair and mutually acceptable. If you do not wish to communicate in person or via the telephone; this is ok too. If you prefer, make contact in writing and give yourself time to write out exactly all you wish to say. Often creditors will help guide you towards a different repayment structure which is affordable and tailored to your own circumstances. However, if you are already aware of what is affordable; propose this to the creditor at the earliest opportunity. Creditors are looking for debtors to show willing in cases of missed repayments and as such will be grateful for your efforts to move forward. If you are not in a position to make repayments on a regular basis, instead why not offer a token payment, this means offering the lender a smaller repayment to hold the account whilst you consider what you could afford going forward. Another consideration should you be in a position where a missed repayment needs addressing but you are unsure how to go about it, is the use of a third party debt support resource. There are several such companies who offer this free of charge and will even deal with creditors directly if you do not wish to do so. In such cases the entire process can be somewhat slowed down though so it is important to manage the third party effectively. An example of such a free of charge debt charity is StepChange.

Representative Example: Representative 1286.98% APR on a loan of £300.00 with 5 monthly repayments of £101.03 Total amount repayable £505.13 Annual interest rate (fixed) 290%

Warning: Late repayment can cause you serious money problems - For help, go to moneyadviceservice.org.uk

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Author: Internal Customer Services Agent