Financial, Debt & Money Advice

Financial products and adviceOften people can get confused about the difference between financial, debt and money advice but they have very different aspects to them.

Financial advice is often about helping someone spend money, on the product best suited to their requirements and for the best price available.

Debt advice is about helping people who have over committed themselves financially and as a result owe more money than they can afford.

Money advice is often about helping people increase their wealth or keep the money they have, this could be through finding ways to save money.

Financial Advice

The large majority of people will have at least one financial product in their lifetime but unfortunately most people also get over charged.

This is often because people fail to seek financial advice because agreeing to take the product and are usually unaware they could have got it cheaper.

The introduction of the internet and comparison website has helped reduce this problem slightly but not enough because not all companies will be included.

The most common financial products are:

Mortgage

Since most people don’t have enough money or assets to pay for a property upfront they require a loan which is secured against the property, this is called a mortgage.

The borrower will typically repay the mortgage loan over 25 years and each month they will pay interest on top of the capital repayment.

Knowing the best interest rate available or even which lender will approve their mortgage application can be complicated, this is where a mortgage advice can help.

Insurance

There are a lot of different types of insurance available but the overall premise is the same, to financial protect something against unforeseen events.

People are legally obligated to take out car insurance because if they cause an accident the financial consequences for others involved could be extreme.

However whether it’s car, life health, home , contents or any other type of insurance, no one wants to pay more than they have to for it.

Often the protection offered is the same and yet we find people paying double the amount each month just because they chose the wrong insurance company.

Loans

Some people need loans to repay debts, go on a holiday, carry out home repairs or a whole list of other reasons, whatever the requirements, the product is the same.

A financial organisation will lend the required money with an agreement it will be repaid in a set period of time, with interest added on.

The financial collapse in 2008 has seen a significant rise in the number of people using payday loans with extremely high interest rates.

This has led to a lot of people being unable to repay the loan and finding themselves in debt but seeking financial advice could avoid this problem.

While it is true financial organisations are lending less, they are still lending to some people so it’s worth speaking to an adviser who can search the market.

Will Writing

We all want to know our loved ones will be financial secure when we are no longer around to support them and having a will written offers that.

A will is a legal document which outlines where someone’s possessions, finances and/or assets will go when they die. It’s important the document meets specific legal requirements or it may be consider invalid.

Will writing doesn’t have to cost a lot of money and getting advice before agreeing to anything is one way to make sure the price is kept down.

Debt Advice

Debt advice & SupportThe recession in 2008 has meant a large rise in the number of people requiring debt advice as unemployment, home repossessions and debt soared.

Knowing which debt solutions someone should enter to resolved their problem requires advice from a licensed debt advice organisation.

Debt Solutions:

Debt Management Plan

If someone can repay the debt over a reasonable period of time, such as 2-3 years and is able to get interest and charges frozen a debt management plan is usually best.

A debt management plan is not a formal arrangement which means it can be changed at any time, by either party involved in the solution.

The person in debt will repay the full debt by making monthly payments, but over a longer period than they originally agreed with creditors.

IVA

An individual voluntary arrangement (IVA) is a formal debt solution which allows someone to repay a percentage of their debt over 5 years.

Any debt still outstanding at the end of the 5 years will be written off, however any extra money acquired during the period will have to be paid to the debt.

Wrongly entering an IVA could mean someone repays more money back than just the debt they owed as fees and charges will be included.

Bankruptcy

When all other debt solutions have been explored and found to be unsuitable the last resort is bankruptcy but there are more than routes into bankruptcy.

Most people should  have a lot of bankruptcy questions before they finally enter the debt solution because it’s the most severe on a person’s credit rating.

Scotland Only:

Some debt solutions are only available to people who live in Scotland but they are generally very similar to those in the rest of the UK.

Debt Arrangement Scheme

A debt arrangement scheme is similar to a debt management plan however a DAS is a formal arrangement and therefore can’t be changed by creditors. All interest and charges have to be frozen once the debt arrangement scheme has been agreed by the creditors.

To enter a debt arrangement scheme people need to speak with a qualified money adviser who will complete their application.

Protected Trust Deed

If someone is able to make a monthly contribution to their debt but cannot afford to repay the full debt owed, a protected trust deed could help.

Monthly contributions will be made to the debt for 3 years and any debt still remaining will be written off, although at least 10% of the debt must be repaid.

Sequestration

Also know as Scottish bankruptcy, sequestration is a last resort to deal with debt problems and should only be considered when all other solutions aren’t possible.

Entering sequestration doesn’t mean someone will just write off their debt and they may have to still make some contribution to their debt.

Entering sequestration wrongly could result in someone losing assets or savings so it’s important they check with a debt advice organisation first.

John Carlton

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