Abacus Daily Debt News

Britain’s debtors are still relying on cards as an easy way to access credit, an industry expert has said, something that he noted has been going on for several years.

Director of national money education charity Credit Action Chris Tapp observed that many people use their credit cards to regulate their income, while others are forced to keep them for necessary living costs.

Noting that lending in this sphere does appear to be performing better than other forms of consumer credit, he remarked: “We haven’t seen the end of Britain’s love affair with the credit card.”

Mr Tapp went on to warn debtors that a fall back into the same habits of years gone by following banks becoming more willing to lend as the economy recovers would be detrimental.

His comments come in response to figures released by the Bank of England, revealing that total net lending had risen by £700 million in September - increasing the need for a debt management solution for many debtors.

By Sarah Adie

Debtors need to prioritise their mortgage repayments over other household expenses, an expert has suggested.

Responding to recent LV= research that indicated people view burglaries to be a bigger threat than payment problems, editor of Your Mortgage Barney McCarthy stated that, although it is positive that people are “being security conscious”, this should not come “at the expense of missing … mortgage payments”.

“Making your monthly mortgage repayment should be the highest priority on your budget,” he went on to say.

And Mr McCarthy further highlighted the importance of insurance, which “shouldn’t be something you skimp on” when money is less available.

However, this is something that many debtors appear to be doing, with the survey revealing that only 37 per cent of homeowners have insurance policies in place to cover their mortgage payments should their income be reduced.

It was also found that, while 65 per cent believe burglary to be the primary threat to their homes, 49 per cent are concerned about mortgage repayment issues.

A debt management plan is often the best solution for unaffordable mortgage payments as borrows can’t afford both mortgage payments and contractual unsecured credit repayment. A debt mangement plan allows for lower unsecured credit repayments, make the mortgage and any arrears affordable.

By Sarah Adie

Debtors have been left feeling angry and cheated by the way the repayments process is handled by creditors, according to new research.

Findings from a study conducted by moneysupermarket.com have revealed that the majority of those with credit cards are unaware that most providers operate on a negative payment hierarchy basis, with the cheapest debt being cleared first.

When this fact was made clear to respondents, 37 per cent stated they felt cheated, while 29 per cent became angry. A further 17 per cent were confused about the process, while seven per cent of borrowers admitted to being worried.

Site editor with the company Clare Francis remarked that many customers "end up paying more than they should in interest" because of this misunderstanding.

In other news, it was recently suggested by talkaboutdebt.co.uk that debt management problems can affect people’s ability to work, with 29 per cent of those in financial trouble having to keep out of work for a period of up to six months.

By Sarah Adie

The recent decision by Halifax and the Bank of Scotland (HBOS) to increase its charges for overdrafts above a certain amount has been highlighted as being both a positive and a negative by an industry expert.

Andrew Hagger, spokesman for financial comparison site Moneynet, observed that such a move was beneficial because "they are doing away with the interest element", as people are always unaware of the amount incurred by going overdrawn.

However, he also stated that "the trouble comes" in comparing the fees generated under the new system with those from the previous process.

Debtors have been advised to consider using a different provider, or alternatively monitor their budgets. "If you’re constantly overdrawn," Mr Hagger said, "then you need to look at that issue."

His comments come in response to the banks’ plans to charge those with an arranged overdraft of up to £2,500 a £1 fee a day and those with accounts over £2,500 £2 daily.

By Sarah Adie

The majority of students are finding they must turn to paid employment during their university years in order to help finance their studies and avoid a debt management crisis new research has revealed.

Findings from a study of more than 1,000 pupils by studentgems.com indicated that 79 per cent of those in higher education have a job to supplement any other income, a statistic that may only increase given the rise in the final debt figure for graduates.

Of these, over half were working more than 20 hours a week and many admitted that their courses were affected because of this necessity.

Co-founder of the website Joanna Ward stated this trend was “inevitable” and that “it is worrying that students’ studies are being disrupted after they commit themselves to a job”.

However, those that are most worried about their rising debts can now consult a money doctor, provided by more than 70 universities across the country, who will offer help and advice relating to issues such as expenditure and managing budgets.

By Sarah Adie

Britons could benefit from making use of Legal & General’s new online Salary Sacrifice calculator, a tool that highlights the effect of reducing remuneration as well as the amount that could be set aside for increasing pension payments without affecting take-home wages.

This suggests that people concerned about falling into debt in their retirement may be able to lessen their current anxiety levels.

Jamie Vale, business development director for savings at Legal & General, noted that the service is becoming popular among many companies.

"[It can] increase pension contributions for their employees at no extra cost as the savings from national insurance and taxable income fund the extra pension payments," he said, adding that prior to the introduction of the calculator, increasing contributions to pensions while maintaining a level of take-home pay was "often quite complicated".

Earlier this month, it was suggested by Andrew Harrop, the head of public policy for Age Concern and Help the Aged, that older people could receive financial, physical and mental benefits from working during their retirement.

By Sarah Adie

Britons could benefit from making use of Legal & General’s new online Salary Sacrifice calculator, a tool that highlights the effect of reducing remuneration as well as the amount that could be set aside for increasing pension payments without affecting take-home wages.

This suggests that people concerned about falling into debt in their retirement may be able to lessen their current anxiety levels.

Jamie Vale, business development director for savings at Legal & General, noted that the service is becoming popular among many companies.

"[It can] increase pension contributions for their employees at no extra cost as the savings from national insurance and taxable income fund the extra pension payments," he said, adding that prior to the introduction of the calculator, increasing contributions to pensions while maintaining a level of take-home pay was "often quite complicated".

Earlier this month, it was suggested by Andrew Harrop, the head of public policy for Age Concern and Help the Aged, that older people could receive financial, physical and mental benefits from working during their retirement.

By Sarah Adie

Repossession enquiries from borrowers struggling to make payments have increased over the last quarter, the Homeowners Advice Centre has said, due in part to a decline in the number of companies providing financial aid to those in distress.

Chris Jenkins, co-owner of the organisation, observed that, aside from this reduction in monetary assistance, the economic crisis has also led to a rise in calls for help, as "people … continue to look for options during a period of financial difficulty".

His comments follow the publication of the Property Portfolio Rescue distress index, which revealed an annual increase of 25.7 per cent in contact from troubled homeowners.

The review also predicted that, by the third quarter of 2010, the number of repossessions will climb to 18,392.

Mr Jenkins added that many debtors are still struggling, despite reports suggesting both the housing market and the economy appear to be recovering, although he did say that a spike in mortgage arrears will not necessarily mean significant growth in repossessions.

By Sarah Adie