Every penny helps!

Sunday 26th October, 2008 - £7,499.83 in debt…

It looks like I’ve started a trend - suddenly everyone wants to pay off their debts! It could be something to do with this recession we’re teetering on the edge of, but I think my influence should be taken into account as well. Increasing your monthly credit card payments is the new cool thing to do, and Primark is the new Armani.

According to the BBC, the number of people consulting Citizens Advice about their debts has risen by a third in the past year. Given that this means more people are searching for debt advice on the internet and finding this blog (bad luck, chaps), I thought I’d give you a quick run-down of the best sources of debt advice I’ve found so far in my quest for debt freedom.

     1.  Martin Lewis’s site, www.moneysavingexpert.com, is a very fine resource once you get your head around the somewhat busy homepage (and the fact that it’s two consonants away from ‘monkey shaving expert’). Martin himself might come across as an android with no spending urges whatsoever, but the forums (especially Debt-Free Wannabe and Up Your Income) are well worth checking out for advice from fellow humans. Receiving the weekly email updates is like having a relentless snapping terrier at your heels.

     2.  The Citizens Advice homepage is at www.adviceguide.org and offers simple, step-by-step guides to paying back your debts, negotiating with your creditors, dealing with mortgage arrears and so on. It doesn’t preach, but nor does it offer alternatives to the accepted methods, or advice on coping with the emotional side of things.

     3.  One site that does look into the psychology of debt is the very one you’re reading now. As well as my own blog, which was described as “helpful” by one reader and “very good” by another (high praise indeed), Consumer Choices also has a debt centre, featuring news, articles and consumer guides.

     4.  The National Debtline offers free, confidential advice on its website (www.nationaldebtline.co.uk) or on the phone (0808 808 4000, which is a freephone number). There’s a range of factsheets on the website, but National Debtline specialises in giving personal advice via email or phone. You can email an advisor by clicking here.

     5.  If your money problems could be solved by sorting out a dispute between you and a financial service provider (your bank, insurance company or PayPal, for instance) contact the Financial Ombudsman Service at www.financial-ombudsman.org.uk for advice. If you need to write a letter of complaint, use the FSA website (www.fsa.gov.uk) to find the regulations your service provider should be obeying and quote them.

     6.  If you’re paying off debts you’ll need to save money on some essentials: www.petrolprices.com will tell you which petrol stations in your area are offering the cheapest prices per litre. It’s not something I check every day, but you can sign up for weekly email updates. Use www.mysupermarket.co.uk to compare grocery prices before you do the food shopping. I saved about 13% of my food budget by doing this.

     7.  For some genuinely useful practical help, visit www.whatsthecost.com and calculate the real cost of your debts including interest. The amazing snowball calculator will also tell you which order to pay your debts in, how much interest you can save by doing it the right way, and how much to pay per month if you want to be debt-free by a particular date. I had no idea about this site until a few months ago, but it’s now one of my favourites.

     8.  The Consumer Credit Counselling Service is another charity that gives free and confidential advice. As well as offering a free helpline (on 0800 138 1111), the website (www.CCCS.co.uk) features a Debt Remedy service, which starts with a comprehensive 20-minute questionnaire (to establish the kind of mess you’re in) and ends with the CCCS sending you a Debt Remedy booklet. This includes your budget, a summary of your debts, and advice about paying it off. Beware though: If you’re self-employed the Debt Remedy service won’t apply to you, and you can’t ask the charity for help if you’re not a UK citizen.

If you’re in lots of debt and stuck for an answer, the best advice I can give you is two-fold: (a) talk to someone, and (b) make sure you’re talking to the right someone. Doing a Google search on ‘debt help’ is likely to throw up a lot of unscrupulous companies that are trying to offer you an expensive consolidation loan or IVA. These are often the wrong solutions to the problem: what you need is support and practical, impartial advice. Good luck.

The Matiz post MOT

Tuesday 19th August, 2008 - £8,078.83 in debt…

I woke up today in what I can only describe as a chipper mood. The sun was shining, Rafael Nadal had claimed his place as tennis’s world number one, and I was looking forward to booking my holiday. I tra-la-la-ed my way to the front door, a skip in my step, picked up the post, and discovered that I’ve been mis-sold some Payment Protection Insurance (PPI) by Endsleigh. Hooray!

I have a car insurance policy with Endsleigh, and it’s not due for renewal until January, but I called them on Friday to add my boyfriend (who’s learning) to my policy. This went as well as could be expected, and will only cost me an extra £20 for the rest of the year. When my new credit agreement arrived this morning, it included an extra couple of quid per month for PPI, which I hadn’t asked for and hadn’t been asked about. 

“Oh, how charming!”, I thought. “How lovely of them to assume I’d benefit from PPI and add it to my policy without wasting my valuable time by asking me!”. Perhaps if I’d been in a worse frame of mind I might have marched down to Endsleigh’s Plymouth branch and fire-bombed it. Who knows?

Whenever I’ve been asked whether I want PPI, I’ve always said no. It’s a waste of money and, frankly, if I ever find I can’t afford £18 a month for my car insurance, I’d be better off selling my car. I’m 100 percent sure that I wasn’t consulted about this.

My first step was to become slightly enraged and then get over it. I checked the smallprint so that I could phone Endsleigh and bellow “how DARE you change my policy?” down the phone. But, as it turned out, they’ve been charging me for PPI since January! This is what happens when you don’t pay any attention to your finances for years.

So, I’ve tried phoning Endsleigh and emailed them when I couldn’t get through. I’ve explained what’s happened and asked to cancel my PPI. But can I reclaim what I’ve already paid?

Money Saving Expert says I can reclaim mis-sold PPI on loans, credit cards and store cards, but doesn’t mention dodgy insurance policies. What do I do next…?

Update!

I’ve emailed the Endsleigh complaints department, explained everything and asked for a refund of all the PPI charges I’ve paid so far. I’ve backed up my claim by referring to the FSA regulations Endsleigh is subject to. If you’re thinking of making a similar complaint, you can check whether the company in question is on the FSA register by going here.

A Cuddly Toy

Tuesday 12th August, 2008 - £8,228.83 in debt…

I know I’m only three months into paying off my debt, but I can’t help thinking about things I’d like to spend my money on. It’s getting increasingly difficult to stop myself from getting more credit and buying a new car, a house, a holiday, maybe a nice 42″ TV… a cuddly toy?

Anyway, I’m not going to do that - I’m going to pay off my debts before I make any major purchases. Yes I am. But what happens if I pay everything off and my credit rating is still inexplicably poor? The credit crunch could make it very difficult for me to grab a mortgage, so I’d best get working on my credit score now.

The Money Saving Expert site has just launched a new credit scoring tool. This will tell you, at no cost, how much of a risk you are to credit companies. It will ask you ten easy questions, and you won’t even have to have any paperwork handy.

Neither borrowers nor credit reference agencies just have a ‘credit rating’ that applies for you across the board. The term is ‘credit score’ and it simply compares you against a mythical ideal borrower. It depends on factors that can be worked on or changed, and there is no such thing as ‘credit blacklisting’. There’s more information on credit scoring in this article.

Using the Money Saving Expert tool is quick and easy, and it allows you to consider how your score could be improved. For instance, it asked me how long I’d been living in my current house for - less than a year, one to three years, or over three years - suggesting that, once I’ve been here another year (it’s currently two years), my score will magically improve.

It also asked me how many credit cards I have, regardless of whether I use them. It emphasised that lenders get nervous about my access to credit - not just the credit I actually use - so I must remember to cancel all my credit cards as I pay them off. That was very useful to know.

Even though I’ve had no CCJs, never been bankrupt, and am on the electoral roll at my current address, a mixture of missed payments and loads of credit have made my credit score, in Martin’s eyes, “weak”. But, if I can make it to my 30th birthday according to the debt-paying-off plan, my credit score will change to “excellent”.

But that won’t happen if I forget to cancel any of my cards (as soon as I’ve paid them off), fall behind in my minimum payments (according to Martin, this could set me back years), or have a weak moment and apply for a loan on that coveted 207CC. Fingers crossed…