Tips for When You’re Paying off Debts

Falling into a period of significant debt can be a very worrying and problematic experience for anyone. Fortunately, there are steps that you can take to help get yourself away from the threat of debt, and start living a more secure financial life again. For example, switching to a 0% balance transfer card could be a wonderful way to cut down the amount you’re paying in terms of interest on credit card debt. Some of the best deals currently offer up to two years of payments interest free, which can help you regain control of your spending.

Other tips for paying off your debts include:

Reject APR Increases on your Credit Card

If you owe money on your credit card and the company that you’re borrowing with contacts you to say that they’re going to increase your interest rate, you will have a period of sixty days during which time you can contact the company and reject the increase. Although doing this will mean that you can’t use the card in question for additional spending, you will be able to repay anything that you might already owe at your previous rate.

Join a Credit Union

Loans taken from credit unions are generally much cheaper than the loans that are offered by high-street lenders and loan providers, particularly when it comes to borrowing smaller amounts. Additionally, these loans don’t incur any dangerous set up fees, early redemption fees or administration costs either. For example, a lot of credit unions will cost around 1% per month on the reducing balance of your loan, which leads to an APR of around 12.7%

Avoid Expensive Sources of Credit

Not only are things like high-cost credit and payday loans very expensive because of their insane interest rates, but they can also take advantage of your continuous payment authority to make numerous requests for payment in the event that a transaction isn’t verified straight away. This could mean that you accidentally end up dipping into the red with your credit card providers and current accounts. It’s important to remember when considering loans that payday loans should only ever be considered as a last resort for short-term expenses, and even then, it’s important to consider all of the other options that might be available to you.

Pay More than Your Minimum Repayments on your Credit Card

If the majority of your debts are restricted to your credit card, then it’s important to make sure you pay off as much as possible, as often as possible. If you only ever make the minimum repayments on a credit card, then you could end up taking several years to repay the full balance that is owed, which means that you end up with a damaged credit score and a dangerous financial situation. Most people simply don’t realize that their credit report records whether or not they’re making a bigger repayment, or the minimum repayment. If you aren’t on a deal for 0% interest, then only paying the very minimum on your existing debt could suggest to future lenders that you don’t know how to manage your finances successfully. This means that you could end up having more problems with obtaining credit at a later point in your life.

Consolidate with Personal Loans

If you owe a lot of money on an overdraft or a credit card that comes with a particularly high interest rate, it’s worth considering getting a personal loan to help you move all of your debts into a single place and make repayments more affordable. Sometimes, these loans offer a lower APR, and help to give you more certainty over the amount of money that you need to pay each month, as well as the period over which you will be able to clear your debt.
Consolidation loans are best avoided in some cases, as most charge a high interest rate and can spread your repayments over a somewhat inappropriate period. Additionally, some consolidation loans will secure payments against your home. Consolidation loans should only be considered if they will cost you less than your current arrangements.

Pay Off your Debt Before You Save

While it’s certainly a good idea to make sure that you have a financial cushion to use in the case of emergencies, there’s not much logic involved in having savings if you also owe a lot of money on an overdraft or a credit card account. The rates that are available on savings accounts are often far lower than the average rate of interest on a credit card. That means using your savings to pay off the amount you owe could end up saving you hundreds of pounds every year in terms of interest charges.

Build your Credit Score

Finally, before you start applying for credit in the first place, make sure that you check your credit report and inform organisations of any errors that might be on your file. If you have a poor credit history this will reduce your chances of being accepted, and may ensure that you end up getting a higher interest rate if you are accepted.

Credit Cards

How Paying by Card Protects You

Paying with a card instead of using cash can give consumers some valuable protection if the company that they purchase from doesn’t deliver the item promised, or goes bust. You may be able to claim a refund for the items that you don’t get from the credit card company. Additionally, you might be able to get some protection when paying for items via debit card under certain schemes.

Rights and Buying by Credit Card

If you purchase something with a credit card, such as a vacation or goods that cost up to £30,000, you will be covered by the 75th section of the consumer credit act. This act determines that credit card companies have liability alongside the seller if there’s a problem with anything you bought. The problems that are covered might include issues where the company haven’t supplied the goods bought, or failed to provide goods that were up to standard. Additionally, you can claim if the company misrepresented the goods they were selling.

In order for any person to qualify for protection from a credit company, they will need to spend a minimum of £100, or a maximum of £30,000. The minimum amount will apply to each set of items, or item that you purchase, rather than the complete bill. For instance, if you purchased a jacket and dress that weren’t sold together, and each was worth less than £100, you wouldn’t be eligible for section 75 coverage.

Another example might include purchasing event tickets. While family tickets would count as a single item, multiple tickets for a family wouldn’t count. However, you may be able to make claims against your credit card company using a voluntary “chargeback” scheme, which we will address in a moment.

The Rules for Second Cardholders

A credit card doesn’t necessarily have to be part of a “joint” account, for another person to use it. If you’re a second cardholder, perhaps because your wife, husband, or partner is the main holder of a credit card account, you may also be able to access some legal protection from your card provider. It’s a bit of a grey area here, so it’s worthwhile to check with the card issuer at the outset of your next big endeavor, but in broad terms you will often be covered in certain circumstances.

For instance, second cardholders are often covered if:

They purchased something that was for both people who use the card, or for the main cardholders specifically, such as a birthday present or a family holiday
The claim for assistance is made by the primary card holder. If it’s the main card holder that applies for assistance, they will be covered by all protection offered under section 75.

How to Make Claims When You Paid by Card

If you purchased something using a credit card and you encounter a problem with the purchase in question, you should make sure that your first step is to contact the company that you bought the item from. However, if you can’t get a reply, or a refund from that company, you will be able to make a claim against the credit card company. At this stage, you should:

Contact the credit company stating what you purchased, when and where you bought it and how much was paid. Include any copies of receipts you have.
Make sure you tell your credit card company that you attempted to contact the company you bought the goods from, and that you didn’t have any positive response.
Explain what you would like your credit card company to do about the situation. Usually, this will include refunding the purchase into your credit card account. Here, you can state that you’re making a claim under the 75th section of the consumer credit act.

Make sure you keep a copy of the letter that you send.

A Quick Guide on Chargeback

One important thing to remember is that debit cards aren’t typically covered by section 75 of the credit act for consumers, though there is a similar scheme in place called “chargeback”. This scheme can also be used to make claims if you purchase something with your credit card that cost less than £100. Chargeback isn’t legal protection, but is instead a voluntary agreement signed by MasterCard, visa, maestro and American Express.

This scheme allows you to claim for a refund from your debit provider if your purchase is faulty, or doesn’t arrive. The card company attempts to claim the money back from the company that you paid to, reversing the transaction. There’s no minimum spend required for coverage through chargeback, but time limits are in place to making a claim. These time limits can be between 45 and 120 days from making the purchase. The type of card will go a long way towards deciding what’s possible for your chargeback claims.

It’s worth noting that chargeback claims can often take some time to process, because your card company will need to get the money refunded before it can pass the cash back to you.

Logbook Loans

What are Logbook Loans and How Do They Work?

Logbook loans are a kind of secured loan that use your vehicle as security. In other words, the lender technically owns your car until you pay back the loan. Although you can continue to use your vehicle as you would normally, this is only the case if you pay the loan according to the rules that are given to you. It’s important to remember that logbook loans are often trick and complicated, so you should avoid them whenever you can.

You can normally get logbook loans either on the high-street or on the internet. Usually, you can borrow any amount of money, up to £50,000 depending on how much the value of your car is. Some firms, however, will only be willing to let you borrow around half of your car’s complete value. When you get a logbook loan, you will be asked to hand over the registration document of your vehicle, or your logbook. These documents legally prove that you are the keeper of the vehicle. However, even if you don’t hand over these documents, you will still be giving up ownership of your car until you repay the loan.

Taking Out Logbook Loans in the UK

Logbook loans are exclusively only used within Wales, England, and Northern Ireland. You cannot get a logbook loan in Scotland. However, if you are offered a loan based on your car there, it will probably be a conditional sale or a hire-purchase loan. You will need to make sure you understand the details of this loan.
When you get a logbook loan, you will sign a credit agreement and you will also be given a bill of sale. This sale bill will show that the lender owns your vehicle temporarily, but that you can also continue to use the vehicle so long as you’re meeting the repayments as normal.

Most of the time, logbook loans will run for a maximum of around 78 weeks at a time. However, you are entitled according to the law to pay back the logbook loan early if you would like to do so and you can afford it. With certain agreements, you will only need to pay the interest on your logbook loan until the final month of the contract. However, at this stage of the final month you will have to pay back all the amount of the original money you borrowed.

The Problems with Logbook Loans

Usually, typical annual percentage rates for logbook loans, or APR rates are much higher than you would get from a standard loan. This means that logbook loans can be a very expensive form of credit. If that wasn’t problematic enough, as we mentioned above, a logbook loan is a kind of secure loan. This basically means that if you’re unable to keep up with the repayments that you owe to the loan company, you could lose your vehicle.

With logbook loans you also don’t get the same amount of customer protection as you might get with an agreement of hire purchase. You will also need to make sure that you are the legal owner of the vehicle, and that your vehicle is worth more than £500 if you want to borrow anything. There can’t be any outstanding finance on your car.

When Taking Out a Logbook Loan

When you take out a logbook loan it’s important to remember that the interest levels are very high, so it’s important to pay what you owe as quickly as possible. Additionally, some logbook loan providers will ask you to pay extra fees if you want to pay what you owe early. Logbook lenders can sometimes ask for weekly payments, and some won’t take any form of direct debit, which makes it harder for you to keep on top of the amount that you need to pay.

How much you will be able to borrow from a logbook lender will generally depend on the value of the car or vehicle that you are putting up as security. In very rare and specific circumstances, you will be able to get a logbook loan on a car that has finance on it, but you will need to be careful with this process as it can quickly lead to debts and financial problems.

If you cannot pay back the money that you owe on your logbook loan, your lender will have the right to turn to bailiffs who will take your vehicle from you. However, most of the time these lenders won’t sell your vehicle until you have not made several different repayments. According to the law, you will need to be given a notice first, so you should have some time to respond.

If you’re concerned that you’re going to lose your car to a logbook loan, you should use your notice as the time to seek out help.