| Become more informed
- read the money pages of newspapers and by watching or listening
to finance programmes.
Try to pay off debts with the highest
interest first - continue paying the minimum on your other
debts and ensure priority bills such as the mortgage and council
tax are paid. This way your debts will be paid off faster.
If you are offered optional insurance
to cover your payments, consider whether it is suitable or
even necessary - you may already have cover from an existing
policy.
Don't be persuaded to take out credit
if you can afford to pay for goods outright.
Be wary of interest-free deals on new
products. They are only interest-free if you pay them off
within the agreed time period.
Scrutinise your weekly shopping. Are
there less expensive brands or money-saving offers you could
take advantage of?
Remember to look at your budget every
time your circumstances change. Use any spare money to pay
off debts – you are paying more interest on your debts
than you are earning on your savings.
Undergo regular saving health checks.
Don’t put your money away and completely forget about
it. Check that your account is performing well, and keep alert
for new products, which might pay better rates of return.
Don't panic! And don't ignore the problem,
it won't go away.
Don't take out more credit - you'll
only get yourself in worse trouble.
Talk to your creditors and let them
know you are having problems.
Always obtain independent professional
advice on debt.
Some people use one of the debt-management
companies who make payments on their behalf. Be careful, as
they will charge an extra fee for their time and, if they
are late with your repayments, it's you who is responsible,
not them.
Before you think of putting cash aside,
try to clear credit card debt, overdrafts, personal loans
or other short-term borrowings. It's no use starting to save
if your gains are being wiped out by the interest rate you
are paying to borrow money.
You will find it easier to pay off your
debts if you keep control of your monthly outgoings. Keep
a record for a month of everything you spend.
As you move into the black, start to
set money aside each month and get used to the savings habit.
Always contact your bank if you think
you are likely to go into the red. Going overdrawn without
the advance agreement of your bank can be very expensive and
the interest and fees will mount quickly.
Take advantage of the free temporary
overdraft facility offered many banks and building societies
in case you accidentally go into the red by a small amount.
Pay the most important bills like mortgage
or rent, council tax, and gas and electricity first. Otherwise
you will be in danger of losing your home, having your gas
and electricity cut off, or ending up in court and possibly
prison.
Think twice about taking out a loan
to pay off all your debts. You may end up paying back a lot
more than you borrowed and at very high interest rates. You
may not be able to afford the repayments and the loan may
be secured against your home, which you could then lose.
Bringing all your debts together under
the discipline of a personal loan is one means of regaining
control, only if the loan doesn't increase your overall indebtedness.
Simplifying your finances by merging
multiple debts into one big one doesn't necessarily mean your
monthly outgoings will be less. Make sure the interest rate
on offer is lower than the ones you are currently paying.
Steer clear of the loan sharks and credit
brokers in the classified ads.
Seek advice from your CAB. They will
help you work out repayments and negotiate with your creditors,
and also help you keep out of debt in the future.
First decide how much you want to borrow
and for how long. The longest loans tend to be secured ones.
Get a range of quotes for your loan,
then pick the cheapest rate - is it stand-alone or does it
includes things like loan insurance. Look for a loan without
early redemption penalties if there's a chance you'll be able
to repay the loan early.
Lenders will push hard for insurance
for the loan – condiser it if you're in any doubt about
being able to meet the repayments - it might put your mind
at rest. Unfortunately it will also make the loan more expensive.
A good alternative to loan insurance
is accident, sickness and unemployment insurance. This will
protect your overall income, including the loan, if you can't
work.
If you find you can't meet the repayments,
contact your lender straightaway. Banks and building societies
are usually willing to help and might freeze the loan for
a while or extend the repayment period. In a worst case scenario,
the lender could force you to sell something like your house
if the loan is secured on it to pay back the loan.
Double-check the terms and conditions
before signing on the dotted line. Are you clear about what
the monthly repayments will be? Are you aware of any restrictions
and penalties?
Shop around for the latest deals. Many
homeowners are paying over the odds for their mortgages and
could potentially save money by replacing their existing home
loan with a better deal.
Remortgaging is worth considering if
you are paying a comparatively high rate on a standard repayment
or "interest-only" mortgage and your loan is for
less than 75% of the value of your home. The larger your mortgage
the bigger the savings and the more worthwhile remortgaging
is.
You could save around £60 a month
on an average £50,000 interest-only mortgage, for example,
by switching from a standard variable rate to a middle road
fixed-rate deal, according to independent mortgage brokers
John Charcol.
Beware if you are tied into a special
fixed-rate or discounted deal with your existing lender where
you would have to pay a hefty "redemption penalty"
to end the arrangement, if you are considering moving lenders.
This would reduce or even cancel out any savings you make.
. If you have a mortgage, you will have
no choice but to have buildings insurance. Do not necessarily
use your lender, as it might not be the best deal.
Shop around through brokers, the internet
and individual companies - the amount you can pay for the
same cover will vary widely.
Make sure you insure the rebuilding
cost, not the value of your property.
Your mortgage lender can tell you how
much to insure your property for when you take out your loan.
Otherwise, ask a surveyor. Premiums will be lower for detached
houses, and higher for terraced houses and flats.
You may get a discount if you buy combined
building and contents insurance and also if your home meets
your insurer's security requirements, including specific types
of window and door locks.
It might be a good idea to include an
opt-out if the rates of your insurance are increased.
If you live in a postcode area with
a high crime rate it's worth investing in a good security
system. Most insurers will offer you a discount if you have
done this.
Critical illness insurance pays out
a lump sum if you are diagnosed with any of a range of serious
conditions, which include cancer, heart disease, strokes and
multiple sclerosis.
When buying critical illness insurance
you must decide how many conditions you want covered, and
how much cover you need. You must also decide how long you
want the policy to last and whether you want to include it
as part of your life assurance. Most people opt to cover the
cost of their outstanding mortgage loan, plus a bit more.
Your policy should last at least as long as your mortgage.
Term assurance offers you cover for
a specified number of years. Because it is only for a fixed
term, as opposed to the whole of your life, this makes it
cheaper than conventional life insurance. The premiums quoted
on term assurance policies can vary widely so it makes sense
to get several quotes.
Care should be taken when considering
whole of life policies: as opposed to term insurance, these
last throughout your life so your dependants are guaranteed
a payout. It can cost substantially more than term assurance.
Some of these policies are reviewable – it is possible
that after 10 years, your insurance company decides that either
your premiums are going to have to go up, or you are going
to have to accept a cut in the level of cover. However, they
give you life cover, and they have a surrender value at any
time (subject to cancelling the life cover).
When buying travel insurance, if you
only go away for one or two weeks a year, then it is cheaper
to just cover the time you are away rather than buy a standard
package. Don’t pay for a fortnight's cover if you only
go abroad for 10 days in the year. If you travel abroad more
than once a year it will cost you less to take out an annual
travel insurance policy.
The Internet can be useful for comparing
motor insurance quotes. You might be able to save up to 30%
by doing this.
If you have some cash put aside, agreeing
to pay a larger excess will help cut your premiums.
Watch out for the future
of car insurance – a pilot study will be underway from
summer 2003 for a ‘pay-as-you-drive’ scheme. It
will use the data from a ‘black box’ to establish
the usage of the vehicle, and will then construct a monthly
usage premium -similar to that of a utility or phone bill.
However much you use, you will be billed for. This will be
ideal for low mileage users or for the second family car.
The scheme is planned to go live in 2005.
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