Paying Your Tax Bill on a Credit Card

January 28, 2009 on 11:23 am | In Debt Management

I was having a think and the most pressing debt at this time of year if you’re self employed or, for whatever reason you have to send in a tax return, is obviously your tax bill.

 

The internet provides the ability to pay your tax bill on line and this has led to the provision of paying your tax by using your credit card.

 

As you can imagine this opens a huge can of worms.  Given recent economic events I would anticipate that January 2009 will see the largest failure to pay tax on time in recent history.  The Government is nervous that it won’t get paid.  By allowing people to pay on credit cards, the credit card companies may be in for the hit and not H M Revenue & Customs.

 

If you simply can’t pay your income tax bill you could pay H M Revenue & Customs late and suffer the penalties.  Paying your tax bill on a credit card would be ok if you have payments coming in shortly after but the fact remains that you haven’t budgeted for your tax in the previous year and it follows that you have ran your business by using your tax money.

 

Paying your tax bill on a credit card is the most obvious indicator that you are struggling.  Get advice before doing so.

 

Britain’s going bust

October 21, 2008 on 4:58 pm | In Debt Management

I am sure you will agree with me that it is near impossible to avoid the daily headlines signalling that more financial troubles lie ahead.  As the credit crisis continues to take hold of the economy, everything points to recession.  I think we are already in a recession.

As food and fuel prices continue to soar, house prices free fall and concerns over the dire mis-management of the economy widens, the overall picture looks bleak for millions of families in the run up to Christmas.

In the last decade the UK has enjoyed low unemployment, however as the economy continues to slow down John Philpot of the Chartered Institute of Personnel and Development said that ‘a rise in unemployment could be more sudden and sharp than in previous economic downturns’.  General Secretary, Brendan Barber of the TUC also warned ‘that it now looks very likely that total unemployment will reach two million during 2009’.

In the past few months there have been significant redundancy announcements at employers from major house builders and financial services companies.  In recent weeks there have been job losses announced by:

Aer Lingus
Bradford & Bingley
Lloyds TSB
Northern Rock
XL

The prospect of being made redundant is an increasing concern of workers across all sectors of employment.  As our financial commitments are pushed to their limits it may be an idea to think about your financial worries before they get out of control.

If you are concerned about your financial position, don’t delay in seeking professional debt advice.  If you are just about keeping your head above the water, there is no better time than the present.  At Simple Debt Solutions we offer free, non judgemental advice allowing you to take regain control of your situation.

 

Recession or even depression?

October 8, 2008 on 10:30 am | In Debt Management

In my last blog instalment I mentioned recession. Now it appears that everyone agrees that the recession will hit but now they are trying to anticipate how bad it will be. Economists won’t get it wrong but will it be the ‘storm of the century’?

The last super recession, or depression was following the 1929 Wall Street crash. That crash caused a global financial crisis which came from toxic debt which could not be repaid. The similarities between the Great Depression and the last three weeks are obvious; failure of banks, debts in excess of assets and government bail outs etc.

In the Great Depression hard times started in the early 1930s and for some went into the 1950s, following a World War. I don’t think that this recession will be as bad as the 1930s one but it is going to be very bad.

Our economy has been fuelled on credit as do most modem economies and the credit crunch has stopped that, effectively cutting the life force of the economy. It is only the ‘emerging’ economies, such as India and China that will stop a global recession.

I do think that this recession will be worse than that of the most recent recession in the 1990s which saw two years of a shrinking economy, a doubling in unemployment, a fall of more than a third in house prices and the failure of tens of thousands of businesses. This is what’s coming and if this is going to hit you because you have unmanageable debt or perhaps you need to restructure your finances, give Simple Debt Solutions a call.

 

Where does the government get their inflation figures from?

August 18, 2008 on 9:46 am | In Debt Management, Remortgages

They just don’t seem to match recent price increases. On the front page of the Telegraph’s business section today there are details of inflation and it appears to be running between 4.4% and 5.3% but how on earth do they come to that when gas and electric have gone up 35%, water is going up similarly, food is going up 13% (although I may be wrong on that depending on where you shop I suppose), fuel fluctuates daily etc.

Have any of you been able to remortgage recently? There’s another major hit to your pocket (if you can get a remortgage that is).

The thing is that previously, before the downturn in the economy, and the arrival of the recession (sorry, not quite yet but mark my words, recession very soon) the good times rolled. We binged on credit to buy luxury items and now, with rising prices we look like we will be binging on credit for basic living needs – however will credit be still available?

Prices are rocketing, wages are decreasing (in real terms) we can’t remortgage for better deals, credit card and loan debts can’t be readily consolidated by remortgage as home prices plummet. It is grim reading ……

 

Debt Statistics

May 1, 2008 on 9:16 am | In Debt Management

The latest and most notable debt statistics are:

  • £1 million of debt incurred every 5 minutes
  • The daily increase in UK debt is £309 million
  • The average household debt including mortgages is £57,420
  • We pay £257 million interest on our debt every day
  • The total UK debt is £1,430 billion
  • Nearly 300 people will be declared bankrupt today

(Credit Action)

Obviously our debt mountain is getting bigger. I can’t remember where I read it but apparently we have more debt in this country than the whole of Europe. The country is heading for recession and this will be accelerated as the personal lending, which has supported our economy over recent years, dries up.

I would guess most people are putting their head in the sand and not dealing with a debt problem which is nagging at them. When we see a client at Simple Debt Solutions the feedback we get is that they feel like the stress has been lifted. This is because we give sound advice and a practical plan which we can implement on a client’s behalf.

Just give Simple Debt Solutions a call, no matter how trivial you feel the problem is and we will provide a solution.

 

Mortgages, Remortgages and Debt

April 29, 2008 on 12:58 pm | In Remortgages

When you’re trying to remortgage or take on a mortgage for the first time now you will not only be hit by the increase in interest rates but a massive increase in loan fees.

Mortgage fees have in most instances doubled and in other instances there are uncapped fees.  One lender gives a maximum £500,000 lend which would attract £12,000 in fees.

When you are remortgaging, if you can, you really want to pay the fee and not add it to your loan.  For example if you took the maximum loan of £500,000 as mentioned before, you would pay £25,940 for the fee at the end of the term.

There are 116,000 people per month coming to the end of their fixed mortgage deals who are going to be faced with a nasty shock when they see the revised rates.  Some will even experience a negative equity position.

If you are remortgaging to consolidate debt you may have left it too late as many lenders have withdrew the majority of deals following the onset of the credit crunch.  Debt advice is crucial before remortgaging to consolidate debt.  If you are just remortgaging because you have completed the end of the fixed mortgage and, will be paying your debts separately you will drastically need to review your financial position.

 

Getting a loan to live?

April 29, 2008 on 12:18 pm | In Debt Management, Loans

Consumers are running into trouble as a combination of rising costs and tighter lending criteria squeeze their spending powers. Provident Financial has reported that more and more people are borrowing money from them and it blames food and fuel prices. It is worrying that people are borrowing money to live and not just to buy luxury items.

Clearly something has to give. Mainstream lenders are seeing bad debt soar and they are no longer willing to give money to anyone. In fact lenders such as Provident are not a soft touch and in the past six months it has rejected 7 in 10 credit card applications. I am concerned about those people who make applications to look for credit to live. If that is you, you need debt advice.

 

In debt? Know your options to restructure your debt in an affordable way.

February 26, 2008 on 5:36 pm | In Debt Management, IVA's, Remortgages

Simple Debt Solutions have advised thousands of people, and by far the most common and largest debt we find our clients have, is with Northern Rock. Many of the debts we see are in respect of mortgages (secured debts) with part unsecured. 125% mortgages. So for example, if you borrowed £100,000 and your house was worth £75,000, you have a £25,000 unsecured loan (up to £30,000). I know the maths is simple, but I am not sure how many people who took these loans really knew what they were getting into.

In the Times on Sunday there was this interesting article ……

TENS of thousands of Northern Rock borrowers face being trapped in mortgages charging punitive rates of interest following the bank’s nationalisation last week.

About 175,000 borrowers are thought to have been lured into Northern Rock’s controversial 100%-plus loans over the past few years. They are now likely to find it extremely difficult to remortgage after most lenders pulled out of the market last week.

If they stay with Northern Rock, however, they face a huge “payment shock” with repayments likely to go up by as much as £2,000 a year (£166 per month) on a typical loan of about £150,000.

The nationalised bank already has one of the highest rates of repossessions of any lender, and the plight of the 100%-plus borrowers could make matters much worse.

While some were cash-strapped first-time buyers, many others thought the ability to borrow up to 125% of the value of their property was simply too good to miss.

Jamie Lyall, who lives in Newark, Nottinghamshire, and works for a leading high street retailer, borrowed 104% from Northern Rock in July last year. “My wife and I could have put down a deposit, but the Rock deal enabled us to put the money towards an extension,” he said.

“We are now racing to pay off as much of the loan as we can to improve our remortgage options. However, with our second baby on the way this could prove difficult.”

House prices in his area have been flat, so the family are in danger of sliding into negative equity. Unless they pay down their debt, most lenders will baulk at their business.

Ray Boulger of broker John Charcol said: “The government is in effect a negative equity lender, while borrowers who owe more than the value of their homes are left with few options as their chance of remortgaging onto another 100% plus deal is slim.”

Northern Rock pulled its range of 100%-plus loans for new borrowers last week in response to heavy criticism from MPs. Alliance & Leicester, Coventry, BM Solutions, Bradford & Bingley and Cheltenham & Gloucester did the same, leaving limited options for those who have borrowed more than the value of their property.

Mortgages up to 95% are also disappearing fast. Alliance & Leicester, West Bromwich, Britannia and Barnsley building societies have all reduced the maximum they will lend from 95% to 90% of the value of the property.

Brokers said it would not be long before borrowers need a deposit of at least 10% to get a decent rate. Melanie Bien of broker Savills, said: “Aspiring homeowners as well as remortgagers could soon need equity of at least 10% to find affordable deals as the combination of the credit crunch and falling house prices has forced lenders to readdress their attitude to risk”.

Ian Peace, 38, from Huddersfield, West Yorkshire, succumbed to a 115% mortgage with Northern Rock a year ago at a rate of 5.75% fixed for two years. He said: “We were desperate to move and the loan from Northern Rock allowed us to take a lower price on our previous property. I am now extremely worried that I will be stuck with Northern Rock.”

Northern Rock’s 100%-plus range was structured so only 95% of the loan was secured on the property with up to £30,000 as a personal loan – so if the property was worth £100,000, you could borrow £125,000, or 125%.

Peace, who is married and has two children, borrowed 95% of a property worth £144,000 – of £136,800 – plus an additional £28,200. This added up to £165,000, or nearly 115% of the value of the property.

When he comes to remortgage, he may find he is stuck with Northern Rock. However, the best rate available from the bank is 7.58%, giving repayments of £1,225 compared with his current outgoings of £1,038 – an extra £2,280 a year. He could switch just his 95% secured loan to another lender, but Northern Rock would reserve the right to charge him 8 percentage points on top of the standard variable rate(SVR) on the personal loan element. This is now 7.59%, so he would be paying a punitive 15.59%.

The Times on Sunday 24 February 2008

What people don’t know is that they can restructure their unsecured debt by proposing an IVA. The IVA will ring fence unsecured debt and you will only have to pay your mortgage, and an affordable monthly payment to creditors.

Essentially, the deals people took out have changed and in most cases unaffordable. If this is you, don’t struggle on, get debt advice.

 

You’re in debt …. What do you do?

February 15, 2008 on 10:51 am | In Debt Management

So everybody is getting refused mortgages which they were obtaining to get rid of all their credit card debt. The credit crunch is biting and the lenders have tightened up their criteria which apparently hardly anyone fits.

So if you have debts or are self employed you may struggle to get a mortgage. Before doing so you need debt advice.

 

Helping employees out of the red can keep your business in the black

February 15, 2008 on 10:49 am | In Bankruptcy, Debt Management, IVA's

Latest figures show that Britain’s personal debt problem has hit the £1.17 trillion mark, up 10 per cent on last year and with cases of personal insolvency at a record high, it is clearly out of control.

Many businesses already provide their employees with a combination of healthcare, pensions, flexible benefits and company vehicle packages, so why not move with the growing needs of many employees and set up a support and advice service to deal with personal issues such as debt worries, which ultimately detract from an employee’s performance in the workplace. It is such support which should be included in the Human Resource manager’s job description.

It is estimated that at least 25% of the adult population have a problem with debt. Taking a workforce in isolation, it is not unreasonable to assume that 25% are insolvent and could be declared bankrupt.

Bankruptcy is a taboo with employers. Currently, many large corporate organisations have rigid clauses in employment contracts which state that if bankruptcy does occur, employment will be terminated. Where is the sense in that? If an employee is trying to get out of debt and struggling, employers should be approachable and show their support, helping employees to get back on their feet. Surely that would be much more responsible and show the company as being a caring and supportive employer, rather one which sacks struggling employees, perhaps just to save face. Clearly, by helping employees the company retains valued personnel and avoids the costs of having to find an experienced replacement.

Human Resource managers should be aware of the options available or be able to point an employee in the right direction to get help. An alternative and more subtle option to bankruptcy is an Individual Voluntary Agreement (IVA) and something which employers should look to educate employees about. Put simply, an IVA is a private deal between a debtor and their creditors to repay a percentage of the debt over an agreed term. At the end of the IVA any outstanding debt is written off. IVA’s do not have the stigma that is attached to bankruptcy and the information is not released into the public domain, meaning that the impact on both the reputation of the debtor and their employer can be controlled.

It can be a humiliating experience to admit that you are in debt beyond your control, so by being supportive, employers can make the process that little bit more bearable. Of course I’m not suggesting that HR departments should become insolvency practitioners (IPs), but should put out messages to the workforce that the company is there to help in respect of all personal issues including debt problems. If HRs knew the basic options available and had contacts with a reputable IP, they could help employees to get the best possible advice so that they can improve their financial situation.

It’s in an employer’s best interest to help workers tackle debt problems, as with it comes a great deal of stress and anxiety, which can have a huge impact on productivity in the workplace. Stress affects around 7million people in the UK, with many stating that money worries are a main cause.

With consumer debt rising so rapidly and showing no signs of a slowdown, personal insolvency should no longer be a taboo subject but should be openly talked about with employees so that they have the confidence to make the necessary moves to get out of debt, before it escalates into something less manageable and much more public.

 

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