Women increasingly at risk of debt problems

Statistics published by the debt management industry demonstrates just how gravely women are struggling with debt. Unemployment is a major factor in the problem and is causing a large number of individuals to seek debt solutions such as a DMP for assistance.

Even some households where there are two parents in work are finding it impossible to make ends meet. The survey's respondents admitted that in almost 70% of cases, they are less well off than last year, and did not have sufficient finances to manage on a week by week basis. This alludes to the fact that the need for debt management like a DMP will increase as individuals try to find a method of bringing their costs in line with their income.

Also brought to light in the survey was the fact that a fifth of the mums who repsonded are frequently not eating meals so their children can eat. Debt management plan advisers often talk to people who have made severe cutbacks in a last ditch attempt to keep up with debt repayments as well as their other expenses.

Debt management plan numbers are also likely to be driven upwards if the responses to the survey are reflected in the wider community, as almost a 25% of the survey's respondents have become reliant on sources of everyday credit to pay for everyday items. Another bad omen which points to the fact that the requirement for DMPs will increase more widely is the boost in those who are dependent on short term sources of credit to make ends meet, with nearly 25% admitting to using credit cards to cover everyday expenses. This is indicatory of a negative debt spiral, where so much income is being consumed by debt repayments that there is not enough disposable income remains to cover essential items. A DMP is one option available to those struggling with their debts to address and resolve this type of debt spiral.

One element of the survey that was of a lot of concern to debt management plan advisers was the fact that one in every 20 of those individuals of those surveyed admitted to having used a payday loan service one or more times. Debt management plan firms have become highly critical of payday loan companies as a result of the quantity of DMP customers who have been left in a real financial mess because of excessively expensive credit options.

The situation for women, and especially for amongst individuals who have dependents, seems likely to become even worse the near future. It is thought that around three quarters of a million public sector workers will be made redundant over the coming 5 years and up to 80% of the current public sector workforce is female. Fewer jobs amongst women will sadly cause debt problems creating more demand for the assistance of a debt management plan professional.

It's a real cause for concern that certain demographics stand to be particularly affected by the macroeconomic climate around the United Kingdom and by public sector cuts in particular. There are those that will inevitably turn to sources of credit to keep up with their unavoidable expenses until there comes a point when they can return to work. Individuals who already have credit commitments may discover that insolvency solutions or a debt management plan may be the only measure to deal with their debts, even when they have resumed a normal working life.

Payday loans increase debt management plan numbers

The rising cost of housing has forced at least 1 million UK citizens to try a payday loan. The penalty clauses and terrifyingly high interest rates of payday loans can create terrible debt problems. A debt management plan is all-too-often sought to help such debtors work their way out of debt.

Debt management plan experts speak of debts falling into 2 types. The 1st kind is a "priority debt". They are described as priorities because, if left unpaid, you might lose access to essential items and services like electricity, mortgages and gas. Any debts which concern payday loans, credit cards, bank loans and overdrafts are seen as less crucial than priority debts and are consequently known as "non-priority" debts.

As many payday loans are payable at a concrete time and involve significant sums, they are highly stressful. This unfortunate mixture makes payday loans an extremely high-pressure variety of debt. Debtors are likely to repay their payday loan at the expense of their priority loans due to this pressure - landing them in lots of trouble.

So what's next? Debtors are naturally concerned about the outcomes of not paying their mortgage or rent, so they'll often source yet another payday loan to be used for the payment. It is common to see payday loans with 3000% APR interest rates which makes the problem even worse. Unfortunately this is a situation debt management plan advisers see all the time. Every unmanageable debt requires another unsecured loan to pay it off which, in turn, requires another payday loan to handle.

Mortgages, gas and electricity are not the sole reason people get a payday loan and then find themselves needing the debt management plan. One popular consumer journalist recently detailed his own experience of taking out a small payday loan as an experiment.

The journalist found that, once he repaid the loan, he was inundated by payday loan advertising. The payday loan advertising teams hounded him relentlessly, offering him loans by post, email, phone and text. He was offered a promotional loan for his birthday ("... enjoy your birthday worry-free"). He was also offered incentives to sign up his friends for payday loans.

In a tough financial time, where rising numbers of people are struggling to pay priority debts or resorting to a debt management plan when circumstances become too tough, this level of marketing by payday loan companies will obviously create financial problems and debt distress for many years to come.

Payday loans should categorically not be used if you are currently struggling with debt. Extra lending with a massive APR can only make things worse as the fact that you require it in the first place almost inevitably means you are going to struggle to repay it. If you are in a situation where you have debts and are finding thing hard financially, the first thing to do is to break the debt cycle. Starting the debt management plan is one way to implement this break, but there are many other ways which can help depending on your circumstances.

What should you do if your DMP payments are too expensive?

Debt can quickly become unmanageable if your repayments are more than you can afford each month. A DMP could help to make repayments more affordable. This step is undertaken by considering your income and reasonable expenditure. After your reasonable expenses are accounted for, the surplus is paid to your creditors through the DMP. Obviously this appears to be a much more desirable situation than being stuck with debt repayments you cannot afford to pay, but looking after your money while in a DMP is a talent in itself.

The whole point of debt solutions is to address an issue rather than simply to create a different one. Frequently on our DMP forum we hear from individuals that are finding it hard to make their debt management plan payment. There are a few common reasons why people may end up in this undesirable situation, in this piece we look at these reasons and some practical solutions.

The first area of advice is do not commit to a debt management plan payment that is more than you can afford to pay. This seems straightforward doesn't it, but many individuals who are pressurised by creditors are susceptible to being talked into committing to a DMP that they don't really have the funds to afford. What could cause this to happen? All DMP operators stand to benefit financially from debtors paying a higher amount. Not all DMP advisors will misuse their authority as lots are responsible, however there are providers that will encourage you to repay a greater amount than you can reasonably afford for their own financial gain.

The next concern is to make sure your requirements really are fulfilled by the expenditure budgets that are set. It's normally quite easy to work out how much we spend on recurring monthly bills for example council payments, rent, mortgage, food etc. Uncommon costs such as school excursions, clothing, home and car repairs, haircuts and taxing your car are still necessities but could be harder to work out. Reputable debt management plan advisors will encourage you to hold some money to one side for these sporadic fundamentals.

Another thing to consider is how you'll plan for these irregular purchases throughout your DMP. You're unlikely to be able to get further credit on standard terms (though payday and door-to-door creditors may offer you finance with an unbelievable APR that causes more bother) so you should have an emergency fund in place. Create another bank account and every month deposit a payment. You can then take this cash to spend on occasional essential purchases. If you are strict about following this there will be money available when a pipe breaks or your children need new uniforms.

What if the unexpected occurs and you are subject to temporary income shock during your debt management plan? Unless you have a strong financial pot we recommend that you rank your payments e.g. rental payments or mortgage over your debt payments if you are made temporarily unemployed. This is because a debt management plan deals with non-priority debts. Your debt management plan supplier, if they're professional, should be able to work with your creditors to buy you a bit longer to find a renewed income source.

What can you do if your spending grows because you are making use of more credit? We don't advise you take out further loans once you agree to a debt management plan. However, if you find yourself in this predicament we suggest that you communicate with your debt management plan professional straight away. Any more debt accumulated throughout the debt management plan could possibly be added to the plan, however this will elongate the time it takes to pay the debt.

If you want your DMP to go as smoothly as possible you should be diligent with your finances and inform your DMP operator immediately if your circumstances change.

Could the Debt Management Plan Ruin My Credit Report?

Many people receive help with unmanageable debt payments via the debt management plan. A debt management plan can bridge the link between debt payments and what you can afford. Numerous creditors will be left short of the entire sum they are promised by debt management plan users who opt to take on the debt management plan. This will inevitably have a poor effect on your credit report. We consider the links between a debt management plan and your credit report.

Credit reports will not show whether you have enrolled on a debt management plan. Different debt management solutions such as IVAs will not afford you this bonus.

You could recognise that you have become involved with a single debt management plan; however it's in reality simply a collection of unconnected negotiations between you and your creditors to repay your debts at an achievable rate.

Despite the fact that a DMP on its own doesn't show up, your individual creditors will probably report you to the credit reference companies as you are not likely to fully pay off the total amount you have outstanding.

A start-up fee could be removed from the primary couple of payments you make in a debt management plan. This is fairly usual and might mean that your credit file will display un-met payments.

Occasionally your DMP group may not be able to put through your payments to the necessary lenders in due time. This may result in your credit report appear with late repayments on them. This is unfortunate but often unavoidable.

More rigorously, smaller or missing repayments could result in default messages getting sent out on a few or all of your debts in the duration of a debt management plan. This is quite likely to happen. Default notices will change your credit file in a bad way, yet in more positive light they will only be visible for 6 years and will be registered as being "satisfied" should you pay back the debt in full prior to the end of that six year period. A County Court Judgment (CCJ) is another plausible danger should one of your creditors decides not to accept the DMP and to go through legal debt recovery measures. A CCJ will also stay on your credit rating for 6 years.

What length of time will your DMP be live for?
It's necessary to have a handle on this, and your DMP group must give you an estimate before you go with them. Depending on the length of time you ought to think about considerations like getting access to transportation. Make sure you have a plan ready (and prepare if necessary) to replace your motor if you need it and it's unlikely to survive to the termination of your DMP.

When will your credit report begin to experience a return to normal?
This could normally depend on how quickly you're able to repay your debts and if you then take plans to rehabilitate your credit report. Older 'negatives' will not be visible on your credit report 6 years after they happened, and you may be able to make some positive use of credit later (even during your debt management plan) which serves as a good sign to future creditors.

A long-term DMP might not have the initial serious impact of a personal insolvency, but the flow of smaller negative credit blotches to your credit rating may take place across a prolonged time. Each individual will need to make their own choice regarding this based on their individual views and the debt management plan information that they receive.

What Puts People Off From Starting a Debt Management Plan?

Many people struggling to repay their debts often delay taking advice. This is a source of frustration for debt management plan advisers who recognise that during the intervening period, debts have typically escalated to worsen the overall situation of their client. This may result to an extension in the debt management plan term. In this article we’ll look at some common reasons why people delay taking debt management advice.

Perhaps the most obvious reason for a delay is the fear of losing access to credit. A debt management plan, along with most other debt solutions, will typically lead to restrictions in the ability to source credit in the future. This is of major importance to many people struggling with debt as credit can fund the costs of essentials such as food and fuel. Why is this so? Credit repayments are often made soon after payday; many people find that they have little cash left after their debt repayments are made with credit needed to cover the rest of the month.

The loss of credit may be a major concern. However, a debt management plan will result in a cessation of contractual unsecured debt repayments. Therefore cash will be left over to spend on essentials. The debt management plan budget will have prioritised cash for the basics before calculating the actual debt management plan payment. This negates the requirement for credit once the link between real income and real expenditure has been restored.

Negative creditor reaction is a further fear for those struggling to manage their household finances. Many people have heard horror stories about endless debt collection phone calls, legal threats, visits from bailiffs, loss of their home and so on. Creditors are realistic about their lending. They know a percentage of their clients will not be able to repay their debts and this is factored into their cost of lending. They also know some clients will require time and support to repay their debts. Most major creditors are supportive of a debt management plan where they consider the offer of payment to be fair and sustainable. A well-constructed and clearly appropriate debt management plan is likely to result in creditor support more often than not.

Due to adverse press coverage some people worry they’ll receive poor debt management plan advice and be left further out of pocket. There are some poor debt management plan providers operating as well as a few rip-off merchants within the industry. These issues can be avoided by refusing to speak with any debt adviser without professional qualifications (CertDR qualification for example) or any debt management plan provider who is not a member of the trade associations the Debt Resolution Forum or DEMSA. You should check their websites to make sure they have the appropriate consumer credit licence issued by the Office of Fair Trading.

The Debt Management Plan Forum (http://www.debtmanagementplanforum.co.uk/) is a place where those looking to deal with their debts, but who are still not quite sure debt management advice is the answer, can anonymously ask questions to industry experts. There are pages of information relating to debt management plans and the other alternatives available. Where visitors decide to seek advice the website advice team contains four professionally qualified debt advisers who will be able to work with you to establish a solution which fits your needs and circumstances.