That is your lot as card firms get tough

Green Wing stars Julian Rhind-Tutt and Stephen Mangan probably don’t have to worry about it too much but Barclaycard is cutting back on credit limits. The two feature in the latest TV ads for Barclaycard following in the footsteps of Jennifer Aniston, Jennifer Saunders and Rowan Atkinson.
But the card firm is getting tough with applicants and existing cardholders as the UK’s debt problems start to bite.

Barclaycard itself recently admitted writing off a staggering £1.5 billion in bad debts on cards as borrowers failed to repay. And figures show it is now rejecting around 55 per cent of applicants compared with the usual 50 per cent rate.

And around 500,000 Barclaycard customers have had their credit limits cut back as the company tries to reduce debt risks.

What should you do if your flexible friend is no longer as friendly as it was. MoneyExpert.com can help…

Play your cards right

There are still plenty of good deals out there so check out MoneyExpert.com best buy tables for the best cards around. But don’t apply for too many cards as every time you apply and are rejected that can count against you.
Card firms keep a record of failed applications and look at it when assessing whether to allow your application.

Compare credit cards

Debt problems

Often people find debt difficult to cope with because each source of debt will charge a different rate of interest. Confusion comes easily when you’re charged different amounts for different products – overdrafts, credit cards, store cards and personal loans will all charge you different rates. And then there’s the mortgage…

Example standard rates of borrowing:

Product % APR (comparable rate of interest)
Credit card 16.5%
Overdraft (authorised) 12.5%
Store Card 25%
Personal Loan (£3,000) 13%
Mortgage (2 year fixed) 6.38%

Sort your debts

Consolidating your debts into one loan can help you to cut monthly repayments and boost your wealth while also giving you a better chance of becoming debt free. You can take out one loan to repay all your creditors and then concentrate on repaying that loan. This is known as a consolidation loan.

Banks and building societies plus other finance firms offer personal loans for up to £25,000 which you can repay over periods as long as seven years. You can also consider extending your mortgage or alternatively look for a secured loan which is secured against your house. This can be paid off over a longer period and you can borrow higher amounts.

You should also have only one payment a month and will be able to keep track of your debt. Click on MoneyExpert.com’s Debt Consolidation calculator to see what you can save.

IVAs and Bankruptcy

Bankruptcy can seem like an easy solution – you declare yourself bankrupt and you can walk away from your debts. But it’s not that easy. Apart from a few exemptions, control of your assets, including your house and car, will be handed to a bankruptcy trustee and can be sold.

While you are a bankrupt, you will be barred from running a business or holding any public office. You will no longer be a ‘bankrupt’ a year after being declared one, but the Land Registry and credit agencies will always have a record of it.

How can an IVA help?

As the number of people in dire straits rises, so too does the number of people opting to take an Individual Voluntary Arrangement, or IVA, as a way out of their difficulties.

IVAs can take away both the worry that comes from uncertainty and reduce the threat to key assets, such as your home. They give you the chance to clear your debt by repaying an affordable proportion of what you owe. It’s an official, formal agreement that is legally binding and must be approved by a licensed insolvency practitioner.

Under an IVA, the amount of debt is fixed, sometimes even reduced, and the amount of interest owing is frozen, too. The debtor then makes regular, agreed payments for a specified term, after which an agreed portion of the debt can be written off, sometimes by as much as 75%.

An IVA will still appear on credit files for six years after the IVA finishes. However, if you complete your IVA successfully, you will be recorded as having managed your debt, which must stand in your favour in the future.

Call our Debt Experts, for Debt Management and IVA advice, here at MoneyExpert on 01942 710956 (12 noon to 7pm)

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