Latest figures from Credit Action, a national financial education charity, show that levels of personal debt are still rising. UK consumers owed £1,449billion at the end of July – a 6.9% increase on the previous July’s figure. Average household debt is £9,475 excluding mortgages, but this increases to £21,590 among households that have some form of unsecured loan.
With debt an increasing problem for so many people it’s time to take stock and reorganise your finances to ensure you get back on an even keel as quickly as possible and that means ensuring you are not paying more interest than you need.
Tell me about the Platinum Loan
The Platinum Loan is a secured loan which means it is only available to homeowners and the debt is secured against your property. It is a product that is not available direct from the provider, Central Capital, or any other comparison site: applying through moneysupermarket.com is therefore the only way you can take advantage of this market-leading deal which has an annual percentage rate of 7.5%.
It is available on loans ranging from £10,000 to £100,000 and is the lowest secured loan rate in the UK. However, not everyone will be offered the low rate of 7.5%. As with all loan applications, Central Capital will check your credit rating before deciding whether or not to lend. The Platinum Loan is only available to those with good and fair credit ratings and only the best will get the low rate of 7.5% - the typical annual rate is 11.4%. This is still cheaper than other products. Norton Finance is offering an annual rate of 8.9% to those with good credit scores, although the typical rate, which is the rate most will be offered, is 15.9%.
If you have a fair credit rating, the next best rate is from Magic Loans at 8.9%, and Ocean Finance has a product with an annual rate of 9.5%. The typical rates on these deals are 12.4% and 14.9% respectively.
If you have a poor credit rating, the lowest rate you can get is 12.1%, from Norton Finance. Again, the typical annual rate on this product, which is the rate that most will be offered, is 15.9%.
Our Smart Search tool will help you identify the loans you are most likely to qualify for. Remember, though, that secured loans are tied against your property – so if you fall behind with payments, your home may be at risk.
What other alternatives are there?
If you’re looking to tackle debt, the first step is to evaluate everything you owe and set it against your net income. Look at all your outgoings, including ‘small item’ expenditures such as buying sandwiches and coffee at work, or magazine and newspaper subscriptions. Cut back on as many of the ‘small items’ as you can to save cash and also see if you can raise some money – perhaps by holding a car boot sale or selling some unwanted items on eBay.
Prioritise the essentials – your mortgage, household bills and debt repayments. Use comparison websites to see if you can save money on utilities, broadband, insurance and mobile phone bills. You may be amazed how much money you could save – and it could even be enough to tip the balance back in your favour and put you back on track.
If that doesn’t solve all your financial problems however, you may wish to consider a 0% credit card. By transferring your existing credit or store card debt over to a card with a 0% balance transfer period of 12 months or more, you will have at least a year to chip away at your existing debt without interest payments. Currently, the longest 0% deal in the UK is available on the Barclaycard Platinum until January 1, 2010, although this does include a 2.9% balance transfer fee.
Taking out a loan to consolidate debts can be a good solution, particularly if you don’t have the self-discipline to use low-rate credit cards to repay your debt, or you want to avoid the hassle of switching to another credit card deal when the introductory rate expires. Ultimately, by consolidating your debts you will pay back more as you pay the debt back over a longer period. However, consolidating can make payments more tolerable as your monthly repayments will be lower, giving you a little more money to live with each month.
The market-leader is the Platinum Loan, but if your debts are below £25,000 and you don’t want to secure the debt against your property, then there are alternatives. The market-leading unsecured loan rate is from yourpersonalloan.co.uk at 7.6%, while the Barclays Personal Loan charges an annual rate of 7.9% and Moneyback Bank, part of Alliance & Leicester, offers a rate of 8.4%.
Only apply for products you are likely to be accepted for as unsuccessful applications will only harm your credit score further. Use our Smart Search tool to get an accurate evaluation of the loans you’re likely to qualify for.
What about extreme levels of debt?
If you’re deep in debt and struggling to make even the minimum payments on your bills, it’s worth seeking free guidance from the Citizens Advice Bureau or the Consumer Credit Counselling Service.
The key however, is not to panic or rush into rash decisions – there are still options available. For example, you could set up a debt management plan which will work through your income and expenditure and negotiate a freeze or reduction on interest payments. You may be able to set up a debt management plan on your own, or a debt management provider such as Think Money could help your cause, albeit for a fee in the region of 15-17%.
If you can’t realistically repay your debt, an individual voluntary arrangement (IVA) could be the answer. This is an agreement between you and your creditors set up through the county courts helping you to repay your debt over a set period of time and wiping out anything outstanding. Again, there are companies that can assist you through this process including Baines & Ernst. Bear in mind however, that an IVA will affect your chances of getting credit in the future so this is not something to be entered into lightly. Be sure to read our debt guides so that you fully understand the pros and cons before taking any action.
Have your say: Do you already have a loan, credit card or debt management plan? If so, how do you rate the provider? Give feedback on your experience with your loan, credit card or debt solutions provider and help others choose the right product.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.