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Credit Crunch and Debts - What to do?
With the credit crunch being as strong as ever 2008 with no sign of things easing up what options are available to people who want or need to reduce their credit commitments? In this article we hope to look at a number of options available to clients and what effect the credit crunch could have on the options available.
Consolidate your debts with a remortgage
For many homeowners wanting to reduce their monthly outgoings debt consolidation by way of a remortgage may be an option. The credit crunch will have closed the doors for many people wanting to do this though (which is why we haven't even touched on unsecured lending) - mortgage lenders have fewer products, the products they do have seem to be neigh on impossible to get approved if there is bad debt involved and even if you do fit the lenders criteria most lenders at the moment tend to have restricted funding. That is to say they may have a product to fit your needs and you may be able to put a mortgage application in but the majority of 'good' bad credit mortgage deals tend not to be around to long because when the lenders funds that have been allocated for that particular offering are spoken for they withdraw the product possible before the potential borrower has completed on a mortgage or even before the mortgage has been offered (we have seen this a number of times in 2008) so whilst it may be an option it is no guarantee.
Negotiate better deals with creditors
Trying to negotiate better terms with your existing lenders may sound like a reasonable suggestion but realistically the only way a lender will reduce your normal monthly credit agreement and monthly payments is if you have missed payments - asking them to reduce your payments when your account is up to date will undoubtedly get nowhere, why should they, you can afford the payments because there are no arrears right? the truth is many people struggle daily trying to make ends meet and have a tough choice between not missing a payment and putting food on the table. Missing payments will effect your credit rating and it could mean you can re-negotiate your existing commitments but how far will someone get talking to the creditors themselves?
Contact a debt management company and do it right
In our opinion, if a remortgage is out of the question and you need to reduce you normal monthly credit commitments a debt management plan could be just the ticket. In these times of the credit crunch and lenders tightening their purses you can bet one of the few financial industries that will flourish are those offering none financed debt solutions such as debt management. When people look to reduce their monthly credit commitments without incurring more debt there are limited options, one option would be IVA but its a much more sever option than a debt management plan.
A debt management company will do a correct job of ensuring people can afford to live whilst making reasonable payments to the creditor and because its been managed by a third party company the creditor will be much more willing to accept any new payment arrangements as the debt management company will undoubtedly back up their requests for new payments with a full income and expenditure breakdown for the creditor.
Essentially the client makes one single monthly payment to the creditor and the debt management company deals with everything from distributing the individual payments to the creditors to sending monthly statements out to the clients so they know where they're up to.
In our opinion if you do not qualify for a remortgage and you need to reduce your credit commitments then a debt management plan would very likely be the next best option.
