Money Advice

Before tacking debt difficulties, it is essential to collect some information about your financial affairs. Making a list of all the companies and people to whom you owe money is the first step towards clearing your debts and relieving the burden of them. It is important to get the following details for each of the debt:

• The reference or account number
• The contact address and name of the creditor
• The amount owed
• Copy of the original loan agreement that you signed

If you have received court letters or papers that are urgent, you may need to take instant action. If you are not sure about the papers, or what you need to do with them, it is best to seek money advice from a professional financial consultant or agent.

Once you have carefully made a complete list of all the debts you owe, you need to work out which ones need to be dealt with first, such as rent, mortgage or council tax. These are known as “priority debts” and carry serious penalties if you default on them. All other debts are classed as “non-priority debts” and do not bear the same risks as priority debts. Non-priority debts typically include credit cards, unsecured loans and overdrafts, plus loans from friends and family and student loans.

Money advice can also prove to be really beneficial in order to know how to distribute the money among the priority as well as the non priority creditors. Money that is left after the payment of debts to the priority creditors is known as the disposable income. This income can be then used in order to pay off the debts of the non priority creditors. One should share out the available income in equal proportions between the different non priority creditors. This simply means that one should give each creditor a certain percentage of the available income that is based on the total amount you owe. These are referred to as the pro-rata offers.

Also, if you are left with enough money after the payment of all the essential expenses and priority creditors, you can get yourself a debt management plan. It is basically an arrangement with the creditors in order to pay back the amount of debt with the help of regular instalments.