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Quick Guide to Debt Management Plans (DMPs)

Quick Guide to Debt Management Plans (DMPs)

What is a Debt Management Plan (DMP)?

A debt management plan or DMP is simply; a plan or program meant to help you repay your debts comfortably. DMPs are recommendable for people with non- priority debts such as store card debt, credit card debt, overdrafts or personal loans. Debt management plans are usually prepared by debt management companies. Your DMP provider will work with you and your creditors to come up with the most affordable debt repayment schedule for you that is agreeable to your creditors. A typical DMP will involve a borrower making one payment monthly to their DMP provider who in turn, pays creditors as per the agreed plan. Typical DMPs run for 3 to 5 years. They are part of debt consolidation plans designed to help individuals in debt regain control of their debt/finances while decreasing unsecured debt.

Types of debt that can be paid off using a debt management plan

Debt management plans are ideal for non-priority debt which includes; personal loans, overdrafts, building society loans, bank loans, money borrowed from family/friends, payday loans, credit card loans, store card debt, home credit, and catalogue or in-store credit debt.

Examples of debt that CAN’T be repaid of using a DMP include; council tax, court fines, utility bills (electricity and gas bills), child support, TV license, high purchase agreements, National insurance, income tax, VAT, rent, mortgage and any other loans secured using your home. Basically, all kinds of priority debt can’t be settled with a DMP.

Getting a debt management plan

Getting a DMP is easy. Many debt advice organisations in the UK offering free advice can help you get a debt management plan. Free debt advisers offer expert debt advice to many people in the UK every year. They are among the best-suited organisations to go to for advice when you find yourself in financial problems.

Before you choose a specific debt management provider in the UK, it is worth noting that all reputable providers have FCA authorisation. You can check for authorisation on the official FCA Financial services register. [1] This is particularly important when dealing with fee-paying providers.

Once you have identified a suitable provider, the next step is agreeing on a suitable monthly budget. This step is important for determining the amount of money you can afford repaying comfortably. After setting a budget, your provider will go ahead and negotiate with your creditors on new repayment terms. A good provider will be able to secure a good DMP that is agreeable to all parties. Most creditors don’t have a problem with people who owe them money as long as you show gestures of goodwill.

Important considerations

A debt management plan will help you take charge of your finances again. However, it doesn’t guarantee you “peace of mind”. Some creditors may still contact you. Also, as mentioned above, DMPs are available for non-priority debt only. It’s also worth noting that DMPs may affect your credit history.

What’s more; creditors are not obligated to accept DMPs. Creditors may also continue adding charges and interest which can increase the total debt repayment amount. A good provider should be able to negotiate great terms that offer safeguards against such practices. Lastly, it’s good to recognise the fact that DMPs may extend the amount of time it takes to repay your debts. Debt repayment methods such as contractual payments are faster.

Main advantages of DMPs

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Although DMPs attract some cons, they have notable advantages. One, you get debt consolidation without taking on additional loans. A DMP will also make you more organised with your finances. You could also improve your credit score and credit report over time. Last but not least, you stand to enjoy some reprieve from creditors or debt collectors because they have an incentive to stop pursuing you.

Why do you need a DMP?

You can choose to repay your debt on your own; however, this isn’t a good idea if you are in debt in the first place. Instead, you should focus on finding professional help externally. People who let debt overwhelm them before they can seek help face serious financial problems. For instance, no one may be willing to lend you by the time you decide to seek help. Your finances may also spiral out of control. Furthermore, taking long to seek help extends the amount of time you need to become debt-free. You can also get free debt advice in the UK!

Reference

[1] https://register.fca.org.uk/

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Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

No. of UK Pensioners Seeking Payday Loans Has Risen by 200% in 2 Years

No. of UK Pensioners Seeking Payday Loans Has Risen by 200% in 2 Years

According to the latest statistics from payday loan company CashLady, 1.4 million Britons have joined the poorest 10% in Britain. The new shocking figures indicate a 95.2% increase (since 2015) in the number of Britons aged 65 years and above relying on loans to boost their monthly pension.

Hard-up pensioners have increased their borrowing by £157 (from; £1,478 to £1,635). The latest statistics show that this age group is now borrowing approximately £400 in payday loans (now dubbed Grey Day Loans) monthly to survive.

For the first time in Britain, charities have warned of the disproportionate number of seniors seeking financial aid for subsistence purposes. A record 1.4 million pensioners have joined the poorest 10% in Britain. Only 1 million pensioners were part of this statistic in 2015.

The statistics indicate a 26% rise in the number of loans requested despite a 10% increase in monthly income for pensioners. This shows that the average pensioner is struggling to cope with the increasing cost of living. In just two years (2015 to 2017), the average loan amount requested has risen from £302 to £382.

According to the MD of CashLady Chris Hackett, the figures show there is an increasing number of seniors struggling to get by solely on their pension. According to Hackett, inflation levels are primarily to blame. Inflation has reached a historic high. Although pensions have increased, there is still a growing shortfall between the cost of living and pension income.

Personal Finance Society statistics

This new data follows a recent report released by the Personal Finance Society showing that the poorest pensioners receive 75% of their pension income from the state pension. The Personal Finance Society report shows that millions of seniors in Britain are about to become entirely reliant on the £7,000 per year basic state pension for survival. Numerous charities have come forward urging the UK government to do more to support the elderly who are struggling.

Charities’ take

According to Caroline Abrahams, Age UK Charity Director, the UK is at risk of assuming all elderly persons are living comfortably when that isn’t the case. The recent pensioner poverty statistics clearly show that elderly pensioners are at risk once again.

According to Abrahams, surviving in Britain on a low income/wages is hard enough for individuals in any age bracket but extremely stressful for older persons, especially those living on their own and struggling buy food and pay utility bills.

Abrahams believes the State Pension is more important now, more than ever as a tool for fighting against pensioner poverty. She is however of the thought that there is more help for those in dire need. For instance, elderly pensioners can claim benefits they are entitled to. This can make a great difference according to Abrahams given the fact that a record £3.8 billion in benefits goes unclaimed by elderly people every year in Britain. Before seeking alternative income such as taking out payday loans to pay for utility bills or buy essential goods and services, elderly pensioners are advised to exhaust their cash benefits.

Age UK is one of UK’s top charities which helps elderly pensioners get unclaimed benefits. Before pensioners become so desperate to the extent of seeking help to pay for essentials and insolvency costs, they should consider contacting charities like Age UK.

Turn2Us is another charity that offers similar help. The national organisation helps the needy/poor access charitable grants and welfare benefits among other types of financial help. A statement from Turn2Us shows that there is an increasing number of female pensioners seeking Turn2Us’ help.

Many pensioners in the UK don’t get the government assistance they are entitled to like Winter Fuel Payment and Pension Credit. This is because many people have been able to live all their lives without needing these benefits before so they only naturally consider credit which is readily available whenever they need help.

In an interview with The Mirror, Pritie Billimoria, Head of Communications at Turn2Us stated that; most people who have been comfortable most of their lives risk being financially week after retirement. According to Billimoria, struggling financially when you are older can be very distressing which is why elderly pensioners need all the support they are entitled to.

Age UK offers FREE financial advice and help to elderly persons with financial problems. Contact 0800 169 6565. Website: www.ageuk.org.uk.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Personal Lending in the UK Rises Four Times Faster Than Wages

Personal Lending in the UK Rises Four Times Faster Than Wages

According to the latest BBC News research, the total value of pending personal loans in the UK has increased four times faster than income/wages. The current value of outstanding loans stood at £37 billion in the financial year 2016-2017 according to recent UK Finance data.

The CAP (Christians Against Poverty) attests this fact by saying that January 2018 was the busiest month ever for individuals seeking debt advice. This is despite the fact that the FCA claims a majority of the loans taken in the recent past went to individuals who could afford to repay.

UK Finance statistics

UK Finance covers 10 of the largest building societies and banks in the UK. Their statistics indicate a 25% since in the value of outstanding loans since 2013-2014. However, wages have grown by just 6.5% over the same period according to data from the ONS (Office for National Statistics). UK households accumulated a record £37 billion in outstanding personal loans in 2017 alone which represents a £7 billion increase from 2014.

In Northern Ireland alone, outstanding personal loan debt stands at approximately £1 billion. Most British households say they have been forced to borrow loans because of the rising cost of living yet wages have stagnated.

UK households are borrowing to survive

According to a recent BBC News interview, Mel Reynolds, a Batley, West Yorkshire resident and mother of two says ”I borrow money to pay for food.” According to Reynolds, her salary is only able to cater for her mortgage and utility bills. The situation has been so bad for Reynolds she has had to choose between fueling her car and feeding her two boys. This is despite the fact that Ms. Reynolds works full time. She has accumulated approximately £28,000 in debt through bank and credit card loans from 2007 to 2015.

The CAP which has been helping Ms. Reynolds says January was the busiest month ever for individuals seeking help with their loan/debt problems. The CAP was started in 1996.

According to Daniel Kelly, the Creditor Engagement Manager at the charity, there are an estimated 8 million people in the UK worrying on a day-to-day basis how they will pay their bills. What’s more is; January 2018 was the busiest year ever for the CAP debt call centre.

The outstanding loan problem could be bigger given that the latest data from the UK Finance covers personal loans issued by building societies and banks only. Credit card loans, student loans, and payday loans have been excluded from the latest UK Finance data.

BBC England analysis

BBC England’s Data Unit has dived deeper to offer a more in-depth analysis of the debt problem in the UK. For instance, BBC England Data Unit reveals that the current outstanding personal loan debt translates to £1,384 per UK household in 2016-2017. The data analysis also reveals that the debt problem is most prevalent in areas which have experienced the lowest increase in average pay among full-time workers. BBC England data analysis also reveals that St Albans is the worst hit with an unsecured lending increase of 43%.

It gets worse. UK households have over £1.5 trillion in mortgage debt which could pose serious economic risks in case of a sharp increase in personal loan debt.

Welfare organisations’ take

Many welfare organizations in the UK have expressed concerns about the possibility of many people ever being unable to repay their outstanding debt. One such organization is Leeds-based charity, Money Buddies. According to Sylvia Simpson from Money Buddies, the charity has many clients who have confessed to struggling with debt but still willing to take more debt if banks are willing to lend more. This highlights why the FCA has intensified its efforts to crack down on irresponsible lenders.

The FCA’s take

According to Chris Woolard, the Director of Strategy & Competition at the FCA, the current personal debt levels have hit the long-term average triggering a concern for vulnerable borrowers who could be exploited further by high-cost lenders. Woolard, however, states that most lenders are following the rules. The FCA is also taking stringent action when lending rules are broken.

The UK Finance is also committed to responsible lending. This is according to sentiments expressed by one of the association’s spokespersons. ”UK Finance undertakes thorough risk assessment before approving credit applications. The association also advises struggling customers to talk to their lenders immediately.” The association also goes further and states that majority of its borrowers are able to meet their loan repayment obligations without problems.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Banks Issuing Debt at Fastest Rate in 8 Years While Household Debts Soars

Banks Issuing Debt at Fastest Rate in 8 Years While Household Debts Soars

According to the latest Bank of England data, net new issuance of commercial paper and bonds stood at £17.5 billion in November 2017. This statistic shows that November 2017 was the busiest month for UK businesses and banks since October 2009.

Debt markets have been growing at the fastest rate in eight years, and what’s more, bankers expect the trend to continue in 2018. From January to November 2017, UK businesses and banks raised a net £50 billion which was the yearly level since September 2010.

According to Davis Marks, a debt capital banker at JPMorgan, UK banks are expected to be more active in capital markets this year (2018) than they were in 2017. UK banks must, however, refinance existing debt as well as build additional capital to meet the 2022 regulatory requirement deadline.

Labour analysts have been on record warning over rising household debt. According to John McDonnell, the level of unsecured borrowing in Britain may hit record levels very soon. According to remarks he made in December 2017, McDonnell stresses a need for more decisive action from the government in 2018 regarding debt since the UK has already seen a debt crisis with payday loans where payday loan companies were making astronomical profits from people’s financial problems.

Analysts have predicted that the level of unsecured loans per household in the UK will exceed £15,000 in 2018 and could easily surpass £19,000 by 2022 if adequate action isn’t taken.

Million of Britons starting 2018 in debt

The latest National Debtline statistics indicate that 7.9 million Britons are likely to start 2018 with debt accumulated during the Christmas season. The debt advice charity estimates a record 16% of Britons will face difficulties meeting their financial obligations in January 2018 compared to 11% last year. This statistics clearly shows that people will be worse off this year than last year, but all is not lost.

The FCA has new rules in place that require UK lenders to prompt borrowers to repay debt faster. Lenders are also obligated to intervene early in cases of repayment difficulties. For instance, they can cancel interest and/or waive charges accumulated on short-term debt like credit card loans for customers who are in debt persistently.

Quick measures/steps to get out of debt in 2018

In case you are already in debt in January 2018, there are some measures you can take by yourself to repay the debt before more is done by the government and regulators to deal with the increasing rate of household debt. It doesn’t really matter if you took out a short term loan such as a payday loan that you didn’t need. It’s time to take action.

Step 1: List all your debt

If you have more than one loan to repay, you should start by listing all your debt. It may appear obvious; however, most people who take many short-term loans don’t know how many loans they service in a month among other important details such as interest amount and additional fees. A simple exercise such as listing current loans can help you assess affordability accurately preventing you from taking up more loans.

Step 2: Repay the most costly loans first

Step 1 should help you identify expensive debt. Repay such debt first to reduce the total time you take repaying especially if you make more than minimum repayments. Observing this step will also help you reduce the total charges incurred.

Step 3: Halt savings/investments for a while

It’s always prudent to save and invest after getting rid of debt especially if it is short-term debt which accumulates hefty charges in fees and interest. Instead of saving and investing every month, as usual, use the money to offset your debt. However, don’t forget to continue saving/investing once you are debt-free.

Step 4: Consider debt management strategies

If you accumulated a lot of debt during the festive season that may not be repayable easily/faster/comfortably using your monthly savings, you can consider consolidating the debt which is simply; combining many debts into one manageable debt. Many lenders offer this option. You can also visit a financial professional to advise you accordingly given debt consolidation has some risks that must be understood beforehand to avoid more debt problems.

Lastly, don’t get into debt again. If you must take a payday loan or any other type of short term loan, use the loan amount for the intended purposes. Loans should never be misused. Never take loans simply because they are available. You should also take a loan you can afford comfortably.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

4 Money Lessons You Must Teach Your Kids

4 Money Lessons You Must Teach Your Kids

We all have money regrets. You’ve probably made a financial decision you regret to date. It could be anything really from a missed investment opportunity to bad spending habits. Such decisions may have had a major implication on your life to the extent you wish you had known better and wouldn’t imagine your kids repeating those mistakes. Given the importance of financial literacy in life and the fact that schools don’t teach kids about money, it’s your duty as a parent to pass this important knowledge. In case you are wondering which money lessons are the most important for your kid, you are in the right place.

Here are four money lessons you must teach your kids.

1. Saving is cool, It takes money to make money!

Your kids must understand this first for them to know the importance of saving. You can start by getting your kids piggy banks, if you haven’t already, to encourage them to become avid savers. You can also incentivize saving using monetary rewards when your kids reach certain milestones. You should encourage your kid to save pocket money as well as monetary gifts they get from relatives. Saving is a crucial money lesson that should be taught from an early age since you need to accumulate money to invest if you don’t want to take out loans. Furthermore, you need assets to secure loans so you must have some savings first to start your financial journey.

2. You need to wait sometimes to buy what you want

This is a difficult money lesson for most kids, yet it is one of the most important for financial success. A person’s ability to delay gratification plays a crucial role in their future success. Kids who are able to resist from buying things or asking for things they want immediately have an easier time succeeding financially given most important money lessons like saving are a form of delayed gratification. Most parents have a problem teaching this lesson because they want the best for their kids. Parents love giving their children things they desire like toys and gadgets. However, you should make your kid wait sometimes before they get what they want. This lesson will encourage your kid to manage their money better when they grow older. It will also help them appreciate the fact that money is scarce and you need to make smart choices like waiting before you spend.

3. Income counts

Your kids also need to appreciate the importance of having an income. To teach this lesson effectively, encourage your kids to earn income doing jobs like; selling lemonade, pet walking and raking leaves. Making your kids work for money is important because it teaches a valuable lesson money’s scarcity. When you teach this lesson effectively, it will be easier to teach other lessons like savings and spending money wisely since your kids will already appreciate the effort it takes to get money. Unless you are already wealthy and planning to leave your kids a fortune, it’s crucial for them to understand it takes a job to earn money.

4. Sharing is good

Kids should also learn to share from a young age. They should learn that money isn’t just for fulfilling one’s needs but also helping people who are in need. This money lesson is important for teaching responsibility and compassion for others. It’s also important for eliminating bad habits like materialism and selfishness. It’s unfortunate that kids don’t learn much about money in school yet it is a very crucial subject. Teaching your kids the above money lessons is a great way to prepare them for future success. The above lessons equip kids with important traits like self-control which are crucial for financial success in the future. Kids who learn how to save, earn and delay gratification at an early age are less likely to get into financial problems in the future according to numerous research studies. One such study done by researchers led by psychologist Terrie Moffitt from Duke University links self-control with debt problems. According to the study (which tracked 1000 kids in New Zealand from birth to 32 years), kids who had high self-control are more likely to succeed in life. In a nutshell, instilling financial self-control using the above lessons will help your kid avoid financial problems like debt in the future.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Financial Planning Tips For You and Your Family

Financial Planning Tips For You and Your Family

Most couples face serious challenges when it comes to dealing with finances. In fact, many research studies have shown that finances are among the top reasons why couples argue. It gets more challenging when children get into the picture. Couples argue over how to spend money, how to save, invest, share bills, etc. This is usually the case since most marital decisions revolve around money. For instance, you need to consider your finances as a family when deciding where to live, the type of car/s to buy, where to take your children to school, whether you should take a loan, etc.

Furthermore, most people are uncomfortable discussing finances even with their spouses, yet it’s one of the most crucial subjects for couples keen on staying together in peace. This is why family finance is so important. To be able to avoid most family problems, here are the most important family finance tips to consider.

1. Develop mutual finance goals:

This is by far one of the most important family finance tips to consider. As a couple, you must develop finance goals that are acceptable to both of you and your family as a whole otherwise you will end up having endless arguments about money. You must agree from the onset who does what as well as what you intend to do with your money to avoid avenues for arguments. In a nutshell, family finance goals should be developed and accomplished jointly. The finance roles of each spouse should be clear from the onset.

2. Maintain 100% honesty:

This goes without saying. You should be 100% honest with your spouse on every issue including finances from the onset. Most spouses argue about money because they feel shortchanged. This is why it’s advisable to be open about how much money you earn so that your spouse doesn’t have unreasonable expectations about what you can afford to contribute. You should also be open about the loans you have, your credit history, credit cards, etc. from the onset since such things have an effect on your access to credit as a couple/family.

3. Have a budget and follow it:

To avoid overspending and running out of money, you must prepare a family budget and follow it. Running out of money prematurely always causes a lot of tension in families. Preparing a family budget will help to keep your spending in check. You will be able to avoid living beyond your means. You will also be able to know exactly where your money goes which will in turn help in cutting down on expenses if you need to. It doesn’t matter how much money you and your spouse earn. If you don’t have a budget, you won’t be able to move forward financially.

4. Consult each other when making “major” purchases:

Since everyone has different ideas on how they should spend their own money and you seize having your own money when you start a family, it’s important to consult especially on major purchases like cars, homes, expensive jewellery, etc. Consulting your spouse is important because it makes them feel valued as an equal partner in the marriage. Furthermore, there may be a better way to spend the money in question, and you wouldn’t know this if you don’t consult. Furthermore, you would want to be consulted by your spouse when he/she is making a major purchase so, do the same.

5. Set financial goals:

Budgeting isn’t enough since it focuses on how you should spend whatever you make. You need to think of growing your income as a couple so that you can afford the things you want in the future. Financial goals are critical for growth. They help couples avoid the stress associated with being stuck in the same social class for years. If you set solid investment goals now, you should be able to afford a house or new car in the future which eliminates financial stress in the future.

6. Review your financial progress periodically:

Having a budget and following it isn’t enough. You need to review your financial progress often to ensure you are on track. Furthermore, money discussions shouldn’t be confined to budgeting. You should also review the progress of your long-term financial goals. For instance, you should discuss progress on your savings and investment accounts. Reviewing your finances periodically helps to identify and solve potential problems. It also helps families focus on achieving their goals.

Summary

Most family problems revolve around finances. Most couples argue because of lack of enough money, misappropriation of money, dishonesty when dealing with money, name it! The above information highlights the basics of family finance every family should follow to avoid common family finance problems.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Seven Signs of Financial Instability

Seven Signs of Financial Instability

Are you keen on knowing if you are financially stable? People worry about their finances all the time for obvious reasons. You can’t be able to live a comfortable life if you don’t have money. It also takes money to elevate your lifestyle. It’s important to understand the difference between lacking access to money and being broke. You should also appreciate the fact that money is scarce. However, how do you tell when things are seriously going wrong?

1. Your expenses are more than your income:

If you spend more than you earn, you are already in serious trouble. Your income should be more than your expenses otherwise you are living beyond your means. You need to cut down on your expenses immediately to avoid serious financial trouble in the future. You should consider downgrading your lifestyle immediately. For instance, move to a cheaper house, take a bus/train to work, shop for discounts, etc. Your expenses should never exceed your income.

2. You borrow to fund recurrent expenses:

If you take out payday loans among any other types of loans to fund recurrent expenses such as; food, rent and transport expenses every month, you are already financially unstable. Loans such as payday loans are meant for funding emergency expenses. Using them to fund your lifestyle is a scary sign of financial instability.

3. You don’t have savings/an emergency fund:

You can never be financial stable if you don’t have savings. An emergency fund is highly recommended for taking care of unexpected expenses. You can lose your job or get into an accident that affects your ability to work. Without an emergency fund, you can’t be able to survive without taking up loans from friends/family members. If you don’t save/have an emergency fund, start setting up one today.

4. Your debts are greater than your assets:

You can take loans as long as you are in a position to repay them. Loans become a problem when you can’t afford them when the worst happens. If you lose your job for instance, can you be able to pay for all your loans with your assets and still have some money for subsistence? If not, you are not financially stable. This highlights the importance of investing the money you get from loans wisely. If you use loans to buy assets, instead of liabilities, your assets will always be greater than your debt.

5. Your credit score is dropping:

Your credit score tracks all your credit activity. If your credit score is increasing, it simply means you are using your debt wisely. If your credit score is dropping, this is a sure sign that you are engaging in dangerous credit activity such as; misusing your credit cards, defaulting on debt, etc. The ratio of the amount of money you owe over your available credit (i.e. credit utilisation ratio) should not exceed 30% otherwise you will start hurting your credit score even if you make all payments on time. Overusing credit is a scary sign of financial instability even if the credit is available to you.

6. You lose sleep over your finances:

Financial problems are bound to cause stress. However, you should be overly concerned if you lose sleep thinking about your finances. It is advisable to seek financial help if you find yourself worrying too much about money. A financial expert can help you identify your financial problems as well as craft ways of dealing with them effectively. If you are already losing sleep over your finances, seek help immediately to avoid worsening your finances as well as physical health.

7. You have considered debt management/bankruptcy:

Debt management and bankruptcy are measures taken as a last resort when debt spirals out of control. If you have thought about debt management or filing for bankruptcy, you are already financially unstable. People usually contemplate these measures before taking them, so it’s a sure sign of financial instability. You can avoid these measures by seeking financial help immediately.

Summary

People don’t find themselves in financial problems overnight. There are common signs to look out for if you want to know the status of your finances. Discovering the scariest signs of financial instability is important because you have the opportunity to take the necessary measures and change your fortune.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Here Are The Top Debt Myths Debunked

Here Are The Top Debt Myths Debunked

There are many debt myths today that stop people from getting the best out of loans. It’s important to discover what is true about debt to avoid being part of the problem. The 1st step to getting the best out of debt is debunking the most common myths. Below are the top 5 debt myths debunked.

1. Debt is bad

There is this general notion globally that debt is bad so, it must be avoided. This is far from the truth. Many people have been led to think debt is bad because of the consequences faced by people who are unable to service debt. Debt isn’t bad if you can meet your repayment obligations. If you can take and repay a payday loan in time, there is nothing wrong with that. In fact, debt is a good thing in such an instance because you get access to money for taking care of emergency expenses. Debt is also useful when you have a solid plan. You shouldn’t take a loan just because it is available to you. Have a good reason first as well as a solid plan for repaying the loan. You should also understand the type of debt you are taking. Many people don’t pay attention to the terms and conditions of loans, so they end up branding loans negatively. Debt is good as long as you have good reasons for taking up debt and a solid repayment plan.

2. Debt is for the poor

People also associate debt with the poor although many rich people have made a fortune because of taking up debt. Loans are for everyone regardless of your social class. The only difference is the type of loans the rich take. Most rich people take up long term loans for investment purposes. The poor tend to take short term loans for subsistence purposes. You can take a payday loan or any other type of short-term loan to cater for unexpected expenses. So, applying for a loan doesn’t mean you are poor. In fact, your chances of succeeding using your own savings are very slim. Everyone, including the rich, take up loans. The difference is in the type of loans they take as well as what they do with the money.

3. Your credit history/score is better off when you avoid debt

Many people also believe that they can keep their credit score and overall history intact by avoiding debt. This is far from the truth. In fact, you hurt your credit history by avoiding debt since there is nothing to report about. As the name suggests, credit reports record your credit history. If you don’t take up loans, such as credit card debt, payday loans etc., your credit report won’t have any entries. A person’s credit score improves when they show they are capable of meeting their debt obligations. This simply means you have to take up debt. Otherwise, your credit score won’t change for the better.

4. Debt terms and conditions are set in stone

Most people are also of the notion that debt terms and conditions can’t change. This is far from the truth. Lending institutions are usually flexible. However, you have to put in work to get better terms. For instance, you need to be a regular customer to be able to negotiate for better terms. You also require a good credit score and solid assets. Being knowledgeable also helps. Your chances of getting the best possible debt terms and conditions are slim if you have basic borrower information. You need to invest in financial education to be able to negotiate on the next level. Most people believe loan terms and conditions don’t change because they don’t push their lenders hard enough. Lenders also tend to be less flexible on short term loans. Considering most people take short term loans, it’s easy to understand why people believe this myth.

5. Debt settlement is unethical

Lenders love portraying debt settlement as an unethical practice that portrays lack of character. This isn’t the case. Of course, there are people who take up loans and use them irresponsibly. However, most of the people who turn to debt resettlement do so because of circumstances beyond their control such as unemployment, emergency bills, family problems, etc. For this reason, there is no problem with seeking this alternative when you don’t have any other option.

Summary

There’s a lot of misinformation surrounding debt today. To get the best out of loans, you need to understand the myths surrounding debt. Although there are countless myths about debt, the above myths offer valuable basic information.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.