Credit Card Debt Help – The Golden Rules For Using Credit Cards and How To Get Rid of Credit Card Debt

Credit cards make spending money so easy. The process is one step removed and makes us far less careful about it than if we were handing over our hard earned currency. The combination of this with the fact that they are so easy to obtain for most people can be a recipe for disaster.

The use of credit cards has increased enormously over the last decade or so. Lenders are not always responsible about who they offer cards to - often people who clearly have no chance of paying them back if they use them to their full credit limit. Spending money on credit cards is one reason for many of the personal debt problems that people have today.

If you are one of those people with credit card debt, there are certain ground rules that you need to be aware of if you want to put the debt behind you. First and foremost being that you should not consider borrowing more money to pay off your debt, or taking out more credit cards for spending. Debt is rarely improved by borrowing more money and your situation is much more likely to be made worse than it was before. With credit card debt the best solution is to try to move your debt to another card with the lowest interest rate you can find, preferably 0%.

Balance Transfer Your Way Out Of Debt

You need to look for cards with the best interest rates for ‘balance transfers’. It doesn’t matter what the rate is for purchases, because you aren’t going to be making any. This is a very important rule – when you do a balance transfer, you must forget that card as far as spending goes. You will rarely find a card that has a special deal on both balance transfers and purchases, so chances are you will soon lose anything you gain on the balance transfer deal if you start spending on the same card.

You need to have some idea about how long it is going to take you to pay off the total debt on your credit cards. If you know you can do it in about a year, then you can look at doing one balance transfer with a good 0% deal and that should be all you need. Once you have transferred, you can just concentrate on paying back what you owe, without being charged any more interest. Just make sure you focus on when the 0% deal runs out and that you can pay if all off by then.

If you need longer than that to pay it off, then you can either find the lowest rate you can for the ‘life of the balance’ (you are guaranteed that rate until the debt is all paid off) or if you are organised and disciplined you can keep transferring your balance to the next special offer 0% deal and avoid paying any interest at all. I stress that if you are not organised this will not work and you will end up paying interest and other charges. Be honest and decide whether this is for you or not.

Understanding Credit Cards

The way you deal with credit cards will be improved by facing up to some basic truths about them first. The first thing to remember is that the every single credit card is designed to make money for the card company - they would not exist otherwise. This does not mean that there are not ways to take advantage of the benefits of credit cards without paying the card companies, but you need to understand where the traps are and how to avoid them.

They turn a profit by making it very easy for you to spend money you don’t have, and charging you on what you have borrowed until you pay it back. The big difference between cards and loans is that with a loan your repayments are fixed, so you definitely pay interest, whereas with a credit card you can avoid paying any interest at all if you pay off everything you spend every month.

The card companies have a vested interest in you not clearing your balance each month. They hope that you will not repay everything you owe so that they can charge you interest on the money you have borrowed. Credit card companies are also good at building in additional charges for things like late payments or going over your credit limit, so there are lots of ways of getting more money out of you if you do not understand and follow the rules carefully.

In the UK you will see the term APR used in all credit card advertisements. APR stands for Annual Percentage Rate and is the rate of interest that you would need to pay on any debt using the card over the course of a year. Putting the APR on information about credit cards is a requirement of the Consumer Credit Act 1974, and is intended to allow people to understand the longer term impact of the interest rates, and to enable fair comparisons between different cards. You can imagine how difficult it would be to compare the deals offered by several cards if one used monthly interest rates, one annual, etc.

The Minimum Payments Trap

All credit cards have a minimum payment amount which is the least you must pay each month and this is generally about 2 – 5% of the balance. As this is such a small proportion of the debt, you will take an awful long time to pay it off if all you do is make the minimum payments. Remember, the longer you take to pay back the debt, the more the card company will get from you in interest charges.

What the credit card companies dream of are customers who promptly pay the minimum payment each month. This gives the companies the reliability of someone who pays them regularly, but allows them to charge a great deal of interest because they take forever to pay it back. You should aim to pay off the full balance every month if you can, but even if you can not manage that, you ought to arrange a fixed payment for the most you can afford. Always avoid the trap of just paying the minimum payment.

The Cash Advance Rule

Credit cards have their uses, but getting cash advances is not one of them. You will almost always be charged a lot of money for doing this, so the best approach is to act as if it is not possible, and use other means for getting cash. If you do use a credit card for a cash advance there are likely to be additional problems such as any repayments you then make not going towards paying off any of the very expensive interest on the cash advance until you have cleared all the other debt.

Follow these guidelines and you can use credit cards for cheap borrowing and free credit, without paying for the privilege.

For further Debt Assistance and advice on a range of debt related problems, visit DebtAssistanceSite.com

IVA Advice – The Pros And Cons of Individual Voluntary Arrangements

This article is intended to explain the basics of what an IVA is and to offer some guidance on when it may be appropriate to consider one. Most references to IVAs on the web are from companies with a vested interest in offering you one, so there is a danger that the advice may be a little one-sided. The information in this article is unbiased and intended to provide the information you need to make an objective judgement about whether an IVA is right for you or not.

What Is An IVA?

An IVA is an Individual Voluntary Arrangement and is a legal agreement between you and the people you owe money to. It is a way of consolidating your debts into one payment, and will usually result in some of your debt being written off at the end of the process.

The usual requirement for being able to set up an IVA are that you have at least £15,000 in unsecured debts (ie debts which are not secured against your home, such as your mortgage) which you are unable to pay. Your debts must be to three or more creditors and you must have a regular income.

To set up an IVA you will need to have the agreement of at least 75% of your creditors (by value of the debts). If 75% or more agree to the IVA, then the remaining creditors have to go along with it. The majority of IVAs will last for a period up to five years, though the period varies depending on the circumstances.

Advantages of IVAs

• Your monthly repayments may well be less than they were before

• A proportion of your debts may be written off

• You should be debt free at the end of the process

• As the IVA is a private agreement, there are no public notices about it as there would be for bankruptcy

• You will not normally be required to sell your home (as you may be with bankruptcy)

• You will have only one monthly payment to think about

• Creditors will no longer be allowed to hassle you for money owed

IVA Advice - Conclusions

So one of the key things to remember is that IVAs are not free. There is a cost in setting them up, but this is a lot less than bankruptcy and could be considered well worth it when the result is becoming debt free again.

You can find a list of some of the most reputable and reliable UK IVA providers here.

Secured Loans – Why Lenders Are Only Too Happy To Offer You A Secured Loan

There are many different types of loans on offer, but the majority of standard or personal loans are classed as unsecured. To obtain an unsecured loan you need to be able to demonstrate your ability to pay it back in full, otherwise the lender will be unwilling to lend you the money. A secured loan on the other hand, has a very particular meaning. A secured loan is generally only available to people who own their own houses. This is because a secured loan is secured against your property. In other words, if you default on the repayments, the lender can have your house sold off to pay back the debt.

The reason secured loans should not be entered into lightly is because when you take out a secured loan you are risking your home. That is surely a sobering thought for anyone.

What Are The Attractions of Secured Loans

The fact that a secured loan is secured against your property makes the lender far more likely to make you a loan in the first place, because they know that if the worst comes to the worst, they can definitely get their money back by selling your house. For this reason, lenders are more likely to offer secured loans even to people with poor credit ratings. In fact lenders often present them as the ideal solution for people with credit problems who can’t borrow money by other means.

The other perceived advantage is that because of the link to your property value, lenders will usually be happy to lend larger amounts.

Secured loans are usually over longer periods than unsecured loans, so the monthly payment amounts look smaller. Well, they are smaller, but when you consider how much longer you are paying them for, you do of course end up paying much more. The longer your loan period, the more interest you pay.

Other Considerations With Secured Loans

Most personal or unsecured loans will have a fixed interest rate for the full term of the loan, so you know exactly what your monthly payments are going to be. Secured Loans are usually different in that they tend to have variable interest rates, like a mortgage. For this reason, you need to be very sure that you can still afford to keep up repayments if there is a rise in interest rates. Remember, you house is at stake, so you need to be very sure about this. Read the lender’s terms very carefully when it comes to interest rates that they will be charging.

If you are thinking of using a secured loan to consolidate your debts, you may be encouraged by the lender to use it to pay off every one of your existing debts. Apart from the fact that I wouldn’t advise consolidating your debts with a secured loan anyway, you should at least make sure you only use it to pay off debts that are at a higher interest rate than the secured loan that you take out. A single repayment may seem convenient, but it is not worth it if you are going to end up paying more interest in the long run.

If you are seriously considering taking out a secured loan, the first thing to do is prepare a Financial Statement. This will help you understand exactly what position you are in now, and show you how much you can afford to spend on monthly loan repayments each month. Online guides are available to take you through this process.

I hope you will understand how serious the possible consequences of taking out a secured loan can be, and that you will treat the soothing sales pitch of lenders with the caution they deserve. Just remember that you can lose your home, so do NOT rush into anything, be VERY SURE that you can afford the repayments, and DON’T DO IT, if you have any other option.

You can find more information about secured loans and a list of recommended secured loan lenders here.