Debt

Debt like it or not a fact of life and most of us are going to have some at one point in our lives. It could be a mortgage, personal loan or some sort of hire purchase agreement. Handling debt well improves your credit rating. What I am going to talk about now is from experience and I am not qualified to give out advice. I was taught a very hard lesson when it comes to money.

Like everyone I had credit and was paying it off on time and coping well. As is the case when you’re coping well with debt companies were quite happy to give me credit cards, loans and store cards. I used to waste a huge amount of money on things I didn’t need and my worst and silliest purchase was a motorbike on a credit card. When things started to go wrong the bank was happy to offer me more money to consolidate my loans. The spending and debt got worse until my debt was about £15 000, bearing in mind the most I was earning in a year was around £10000 before tax.

Then I started defaulting on my payments and the phone calls started, at first they are polite and are quite happy to come to arrangements with me. Being very naive I assumed I could cope and steadily watched myself get into more and more trouble. I was also using payday loans to try and boost things but this made matters worse. Next the threatening letters started which were either ignored or phone calls were made promising to pay. As with most people acting like this the companies lost patience with me and passed my debt over to debt collection agencies.

Those letters started adding charges onto my debt, anything between £15 and £40 at a time. The phone calls got more and more frequent and difficult to deal with. They would ring early in the morning or late at night. I remember being kept on the phone for 90 minutes by one agency trying to get money they knew I didn’t have. The only way I seemed to get them off my back was to agree to pay more and more money. If I remember rightly towards the end I was expected to pay around £200 a month more than I took home in pay. At this point the people who offer loans at 200%+ apr wouldn’t touch me. I used to get home to find 4 or 5 letters from the bank at £25 a time.

I distinctly remember sitting there at one point in a right mess hoping something would happen to help me; the bank had transferred my loan twice to specialist departments who added interest onto the loans and increasing the costs. The debt agencies were having a field day with me and to cut a very long story short I went onto a payment plan, got 2 CCJs and ended up bankrupt.

Bankruptcy isn’t an easy solution, yes you do stop everyone perusing you but everything you own becomes property of the Official Receiver. It has taken me years to get my credit rating back and up to a reasonable standard of living.

Why am I telling you all of this? I wouldn’t want my worst enemy to go through what I did. The simplest advice I can give you if you’re in financial trouble is don’t ignore it. Talk to the banks as it is there interests to help you. Seek help and stick to the budgets you agree with those helping you. Make sure you take into account your living costs and don’t offer to pay more back than you can afford. When I went bankrupt I would say 60 to 70% of my debt was interest and charges rather than money I had borrowed. Get a grip of the situation as I eventually did and things will improve. I can promise you that.