How to avoid Debt
Perhaps the best way to avoid having bailiffs and sheriff officers come knocking at your door and with the constant letters and phone calls is to not let debt build up in the first place. Over 35,000 sought advice from us last year in regards to debt help and how to manage it. But the surest way to avoid this situation and have a greater piece of mind is to not let the debt build up in the first place.
We understand that debt is sometimes unavoidable, we need it to progress in life when buying a house or car . Sometimes this debt can get out of control and become unmanageable and start to impact the other sections of our life like in the workplace. Different times of the year and different points in our life can lead to debts. The surest way to avoid debt and be in a safer financial situation is to a secure handle on your finances in the first place.
Here we shall set out some tips and explainers about how best to overcome this problem before it ever arises.
Whilst these can be useful in helping to manage your finances, credit cards can have hidden charges and terms that can be counterproductive to your finances. When starting a credit card you will have to agree to terms and conditions that will apply to the use of the card. Each card will have a spending limit and a minimum monthly repayment, but be aware some of these cards also charge a fee.
Credit cards will carry a level of interest charge on them. This means that come the end of the month if you are carrying a negative balance on this card then you will be charged a rate on top of your normal usage fees. These interest charges can quickly get out of control and we recommend that credit cards should only be used for necessities and not for day to day spending.
It is best to avoid using credit cards to withdraw cash for day to day use. When using a credit card to withdraw cash this will probably be charged a fee plus pay a higher rate of interest on this product.
Whilst taking out a student loan may seem like a good idea please do remember that whilst college and university is a time for learning and development that money will have to be paid pack. Under new government legislation you will only start to pay you loans when you are earning over £17,495.
Normally payments will come straight from your wage from your employers through the PAYE system or by self-assessment. For those that are self-employed you will need to make sure you keep accurate records or come the end of the year you could receive and unexpected bill.
Currently you have to be earning over £17,495 before you begin to pay back what was borrowed. After this you will be expected to pay back 9% of what you earn over this amount after deductions so this can come as an unexpected extra at the end of the month.
If you fail to make your repayments this can cause serious debt problems. By law when getting a student loan, you have agreed to repay this back on a certain financial schedule according to your circumstances. If you do not make your payments the student loans company has the right to accelerate your debt. This means that the Student Loans Company can get a court to order your debt to be paid in one installment which is having taken a loan of £10,000 over the course of 4 years adding on interest could cause serious financial struggles. In terms of avoiding this debt the Pay as You Earn system that’s in place for employees means that the charges are automatically taken off. However, if you are self-employed we recommend you keep accurate records to maintain payments and if need consult an accountant at the end of the financial year to make sure this is accurate. For any more information regarding your student loans visit SAAS
This should always be seen as a priority; this payment can be made in a lump sum or spread out over the course of the financial year.
When setting up your council tax payment system make sure to apply for all possible benefits that can bring down your total payments. For more information on this matter check Council Tax Reduction.
Council tax debt can lead to serious financial problems and in worst cases a jail sentence. If you miss a payment on your council tax you will be sent a reminder and if ignored again the council is within its rights to demand the total outstanding balance for the year. In the case of no payments being made on your council tax bill the council can send out bailiffs or Sheriff Court officers in order to pursue the debt. The first time a bailiff visits your property you do not have to allow them to enter the property. Once a bailiff has made a peaceful entry to your property they are allowed to note down items of value that can be taken away and sold to recover the balance of your debt if you do not stick to your payment scheme. You can find out more information on bailiffs and your rights elsewhere on our site here.
Whilst these seem like a quick fix when payday is just round the corner any failure to pay on time can cause issues and send your finances into a crippling downward spiral. With new government legislation to regulate out of control payday lenders the costs have been brought down somewhat.
From the start of 2015 the interest rates on these loans have been capped at 0.8% per day of the amount borrowed. In addition to the cap on this borrower will now never pay more than double the amount of the loan. For example, a loan of £200 for 30 days paid on time will cost a maximum total of £248 which shows how quickly these loans can get out of control and accelerate in cost. Whilst it may be difficult to go to ask friends and family for a short term loan it will cost you less and have less of an impact on your credit score. We here at Creditfix advise that if possible always avoid using a payday loan service as they can cause devastating damage to both your finances and credit score if not handled properly.
The festive period can be testing at the best of time and not just in regards to your finances. Whilst we know that everyone just wants to provide the best for their loved ones during the festive period there are ways to do so without running up unnecessary debt. The best thing to do in regards to avoiding running up debt during the festive period is firstly to make sure all your bills that are priorities such as mortgage, electricity, council tax and phone bills have been taken care of first. If these have not been paid this can lead to serious issues further down the road. Plan ahead, make a budget of your ingoing’s and out goings and decide how much you can afford to spend on over things such as presents and luxuries.