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Tina Johnson desperately wanted to own a car and was thrilled to bits when she obtained finance for a £7000 Rover but this sum turned into £21,500 worth of debt before she had even driven it away.

Tina was unable to take out a standard loan as her credit record had been damaged by an old catalogue debt so her car dealer referred her to a finance company specialising in loans for people with adverse credit ratings.

The finance company informed Tina that she would have to take out payment protection insurance, guaranteed asset protection and a warranty for her car.

These three additional costs along with a whopping 42.5% interest rate elevated the five year loan. The price of the car was £7,080 but £3,228 was added to this figure in payment protection insurance.

It was these add-ons, coupled with the 42.5% interest rate that pushed the cost of the 62 month finance package to an enormous £21,540.

Several months after purchasing her car, it was involved in an accident and considered a ‘write off’. Tina recouped the value of her car through her insurance but the guaranteed asset insurance did not cover the amount of money that she owed to her lenders who were still demanding £13,500 for payment protection insurance and the credit agreement.

Anyone who is considering taking out a car loan should check exactly what they are being charged for to avoid driving into debt. Don't end up paying more in interest than what your car is worth, as you could find yourself seeking an IVA or Debt Management Plan once the repayments start getting to hard to keep up with.

If you’ve been using unsecured loans and credit cards as a temporary fix to your debt problems, this could be the year to break the cycle and get your finances sorted!

Unsecured Loans & Credit Cards in 2008

The Bank of England are warning that unsecured loans and credit cards will get harder to obtain this year as lenders start implementing tougher criteria. If you’ve got a bad credit history, chances are this ‘credit crunch’ will make it harder to find a good loan and credit card.

So what can you do about it? Start managing your finances differently so you’re not relying on credit cards and loans to survive. Work on paying off the ones you have and look at ways to increase your income – and if you haven’t got a budget, I can’t stress how important it is to make one. If you’ve been relying on credit cards and short term loans and are finding you just can't get out of debt – another loan is not the answer!

Debt advice can give you answers on how you can start getting rid of your debt problems – and start getting rid of credit cards and loans for good!

Everyday, people call the Debt Advice Trust asking for answers on a wide range of debt issues. The festive season may be over for another year, but how long are you going to be paying it off? If you put most of your Christmas expenses on credit, you'll probably be asking:

“What is the quickest way to clear my credit card debt?”

It only takes a second to run up debt on your credit card - but can take years to pay it off. This is a fairly simple question, with a fairly simple answer - although it can be hard in practice to clear debt:

Don't increase your credit card debt by continuing to spend! Cut up your cards if need be. Make it your New Years challenge to live within your means without taking out a new credit card or spending on ones you already have.

Make paying it off your priority! Consider if you can cut back somewhere on your expenses and use that money directly to pay it off, for example if you buy a magazine once a week, give it up for six months and read online magazines or borrow them from friends or the library. That extra few pound a week can make a big difference when you multiply it over a year.

Should you Consolidate? If you have high interest credit cards and short term loans, you could think about consolidating them with one debt consolidation loan. How does it work? You find a loan with smaller interest and smaller monthly repayments and pay off all your individual debts so you just have one loan to pay back. Talk to the Debt Advice Trust for advice on whether it will help with your debt.

There’s only a few hours left until the end of the year – have you made your New Years resolutions yet? If you spent the most of 2007 worrying about your debt problems, commit to making 2008 the year you get rid of debt!

Resolution 1:
Get debt advice. Talk to a debt counsellor about your finances and see what options you have. Why do you need advice? There are many debt solutions, but the one best for you will depend on your personal situation. A debt counsellor can give you advice based on all the information you give them about your income, expenses, lifestyle and debt.

Resolution 2:
Decide how you are going to get out debt and take action! Whether that be by contacting banks and lenders for a consolidated loan, looking for a debt management plan, talking to an Insolvency Practitioner about an IVA, or visiting your local court for bankruptcy forms.

Resolution 3:
Make a budget (and stick to it!). Don’t let the same debt traps follow you into 2008. Plan out all your incoming payments and expenses and budget your finances. Once you have all your expenses written down, it’s easier to see where all your money is going and where you can make changes – for example, moving into a house with lower rent. Read our advice on increasing your income and reducing your debt for some further advice.

Resolution 4:

So you budgeted for Christmas, did the best to stick to it, and still worried about how you’re going to afford those credit card bills that could hit your letterbox at any day now?

Well, don’t. Worrying about your debt problems isn’t going to solve anything, but taking action will. If your debt was quite small pre-Christmas and you have overspent during the holiday season, you may only need a debt solution like a debt consolidation loan.

How does debt consolidation work?
Consolidated loans work well if you have multiple debts to several creditors and the interest rates are getting out of hand. You should first tally up the total cost of all your debts, then start looking for a loan with a low interest rate that can cover the amount you need. Once you have gotten your consolidated loan approved, you use the money to pay back all your individual debts and concentrate on just paying back the consolidated loan.

How would a debt consolidation benefit me?
The purpose of the loan is to give you a lower interest rate, smaller monthly payments, as well as reduce the amount of stress that comes from paying and negotiating with multiple creditors.

How do I know if consolidation is the best debt solution for me?
Debt consolidation is best suited for smaller debts. If your debt is over £10,000 you may be better off with a Debt Management Plan or IVA (Individual Voluntary Arrangement). If you’d like to get advice on if a consolidated loan will help you become debt free, contact the Debt Advice Trust today.

The Council of Mortgage Lenders (CML) has said that people may want to consider taking out a debt consolidation loan rather than continuing to struggle with debt that has become too high to manage. They warn that house repossessions and mortgage arrears will continue in 2008.

The CML have predicted that the current trend for three month mortgage arrears will increase from 145,000 at the end of 2007 to 170,000 by December 2008. This suggests that more and more people could benefit from debt consolidation to ease the financial burden.

They have also estimated that house repossessions will rise by a further 15,000 by the end of December 2008 which is a 50% increase from 30,000 in 2007. Figures are set to rise to a whopping 45,000 next year. People should take heed of these predictions and seek debt help now.

The majority of borrowers will cope in 2008 but some will struggle with their mortgage repayments. A debt management plan could be the perfect answer to their debt problems.

The CML also predict that there will be a drop in mortgage lending, a rise in house prices and tougher restrictions on lending.

They see good news on the horizon with the Bank of England’s base rate dropping by 5% at the end of 2008.

Since the turn of the century, people have been borrowing beyond their means. As a result, many are struggling with repayments and the number of people who need debt help has increased at an alarming rate.

Many have heard of debt consolidation but it is surprising how many people do not understand what debt consolidation actually is.

As a result, many miss out on the chance of a debt consolidation loan because they think that their application will be refused if they have a lot of debt. They fail to realise that a debt consolidation loan is specially arranged to help alleviate debt and forms an affordable payment solution to both creditor and debtor.

A debt consolidation loan will allow a debtor to combine a multitude of bills into one affordable sum and is an ideal way to resolve multiple credit card debt. By combining all credit card debt into one manageable sum, interest rates reduce and the balance can be paid off much quicker.

Unlike bankruptcy, a debt consolidation loan allows people to retain their assets. It will also help them to reduce their debt and still maintain a good credit rating. If you add together all of the combined interest rates from individual creditors, it is easy to see how much can be saved with a debt consolidation loan as the APR will be much lower than a batch of interest charges.

An ideal debt consolidation loan is a flexible plan which allows customers to make larger payments if extra income becomes available. This way they can close their account without any penalty fees being added.

If you are looking for a way out of debt and have heard of debt consolidation but never really knew what it meant, you should now be able to see that it is a very helpful way to resolve debt problems. Call the Debt Advice Trust for more information.

Debt collectors are still harassing consumers with threatening phone calls and poor service even though the newly revamped Consumer Credit Act was created to stop these incidences from occurring.

Rebecca Prosser is one of many who has suffered at the hands of aggressive debt collectors for eight years and continues to do so. During this period Rebecca has watched her £5,500 debt escalate to over £50,000 and has suffered severe harassment from the company for this sum. What started off as a small debt has now increased to a massive debt - the amount most people would start considering an IVA or bankruptcy.

Her husband took out the £5,500 unsecured loan way back in 1995. Jonathan made regular monthly payments until he encountered some problems with his salary not being paid directly into his bank account.

The bank responded to this discrepancy by placing severe charges on his account. However, John was not aware of these penalties as he was working abroad and did not have access to his mail. Months later, he was shocked to discover that his original debt had grown extensively. He rang the company several times but was subjected to abusive and threatening comments. The company refused to answer any of his letters and only responded when Jonathan agreed to pay £80 per month on a loan which had swelled to £50,000.

Though the Financial Ombudsman service is now in force, there is very little that can be done for the Prossers as their financial woes started way before April 6th 2007.

If you have debt problems, the Debt Advice Trust can give you free information and advise you on the best debt solution for you.

It is estimated that one in six people could soon find themselves on a debt blacklist as creditors become tougher and refuse mortgages, credit cards and loans.

During 2006, over £7 million was refused by typical lenders but this figure is forecast to rocket to 8.6 million and possibly beyond by the year 2011. Thousands of Britons are already feeling the pinch as they struggle to survive financially from day to day.

Since 2006, house repossessions have risen by over 30% along with a huge increase in county court judgements and defaults. This has urged many building societies, banks and other lenders to tighten their screening process to rule out risky applicants that have the potential to become bankrupt.

This is a stark contrast to the frivolous way that finance gurus used to offer money to anyone and everyone in the past. There were very few credit checks and money was offered with little reassurance of a customer’s ability to pay. In some ways, this may be a responsible move away from the easily accessible debt traps for first time borrowers, but for people experienced in getting loans and credit cards it could make things a lot harder should they have a couple of tarnishes on their credit record. For people already close to a debt solution

Many British lenders have now removed their sub-prime mortgages. Self-certification mortgages are also being cut and many loans will increase by 2.5 percentage points. This could add an extra £150 per month to a £100,000 mortgage.

Debt counselling was a word that Brian Day had heard so many times in the past but never pursued until desperation led him to find out more.

He sought the advice of a debt counsellor back in January 2007 to help him to resolve his mounting debt issues. Brian says that he was impressed with the way that the counsellors offered a sympathetic and caring approach to his financial situation. The first aspect of the counselling was to find debt solutions for his current financial situation; the other was to prevent him from falling into debt in the future.

What kind of debt solutions are available?

As Brian’s debt was quite large, the debt management company advised him against debt settlement as he had too many outstanding bills to contend with. He was advised to take out a debt consolidation loan which would get to the root of his financial problems and provide him with a way out.

Before seeking debt advice, he was confused by the many debt solutions available which included debt consolidation mortgages, home equity loans, an IVA and bankruptcy to name but a few. The debt help that he received allowed him to explore the various options available to find debt solutions to suit his needs.

He was also provided with some really handy debt prevention tips which were of great use. He now heeds the advice of not spending more than he earns and always remembers that every debt is important and has to be treated with the utmost priority.