Debt solutions can help borrowers cope with shrinking disposable
income
Released
on: September 9, 2008, 9:05 am
Press
Release Author: Melanie Taylor
Industry:
Financial
Press
Release Summary: Recent figures about shrinking disposable incomes
underline the need to cut back on spending and seek debt advice
when necessary, says financial solutions company ThinkMoney.com
Press
Release Body: Following a survey from comparison site
uSwitch showing that disposable income had dropped for
the first time since 1997, financial solutions company ThinkMoney.com
has stressed the need for consumers to cut back on their spending
and, when necessary, seek expert debt help or advice.
Released
at the end of August, the report related that UK households are
£2,500 worse off this year than in 2007 – that the
average disposable income had shrunk by 15% in just 12 months.
In
theory, ‘Disposable income’ means
money that’s available for discretionary spending –
the part of a household’s income that’s left after
paying for taxes, social contributions, mortgage / rent, fuel,
food, transport, education, etc.
“Disposable
income, therefore, must cover everything else, from socialising
to buying magazines, computer games and so on: basically, the
things that people actually like to spend money on,” said
a spokesperson for ThinkMoney.com. “But
the word ‘disposable’ can be misleading. The average
household disposable income may be £14,520 (28.4% of gross
total income), but how many households have £280 per week
to spend in whatever way they see fit?”
“Figures
from the Bank of England show that around 230 billion pounds of
the UK’s ‘personal debt mountain’ is not secured
on dwellings. Payments to unsecured debts (credit cards, personal
loans, overdrafts, etc.) come out of a household’s disposable
income, but they’re nonetheless essential – the consequences
of non-payment may not be as serious as missing mortgage payments,
but borrowers are still legally obliged to make them.”
The
good news for borrowers is that such payments may, in certain
circumstances, be negotiable. With the right debt solution, they
could reduce the interest rates they’re paying, or even
arrange for some of their debt to be written off. They may also,
if they can’t make their repayments, be able to reduce the
amount they’re paying each month – something which
this survey indicates may be particularly appealing right now:
“Anyone who was devoting a large part of their disposable
income to unsecured debt repayments a year ago is likely to be
facing serious problems today, and looking for a way to reduce
their expenditure as soon as possible.
“The
first thing to do, of course, is take a good look at their spending
and identify areas where they could cut back. In many cases, though,
this isn’t enough – and this is where a professional
debt solution can give them a chance to regain control of their
finances.
“Most
unsecured creditors would rather renegotiate the repayment terms
than try to force the borrower to stick to the original repayment
plan when this clearly isn’t an option. Many people ask
a debt management
organisation to talk to their creditors on their behalf, negotiating
a more realistic repayment programme – with lower monthly
payments, for example, frozen interest and/or waived charges.”
Should
debt management not be an option, there are other debt solutions,
such as debt consolidation loans, debt consolidation mortgages
and IVAs (Individual Voluntary Arrangements). “Everyone’s
different, and there’s no ‘one-size-fits-all’
debt solution. The important thing is to talk to a professional
debt adviser before making any firm decisions.”
Web
Site: http://www.thinkmoney.com/debt/
Contact
Details: Pennington House, Carolina Way, South Langworthy Road,
Salford Quays M50 2ZY
2012
