The number of people in Britain who may need to seek debt advice could increase, following research that reveals their inability to understand household bills.
According to a report by comparison website uSwitch.com, only one in seven people (14%) could successfully add up a bill from an energy company, despite being allowed the use of a calculator.
This inability to calculate household finances could have widespread effects, such as being overcharged for services or not knowing that debt problems are developing, which has caused many debt advice organisations to express concern.
A spokesperson for uSwitch.com, said: “You shouldn’t need to be an ‘A’ grade student to be able to understand your energy bills. It’s deeply worrying that only 14 per cent of people have passed what should be a straightforward test.”
With many household expenses increasing in cost recently, it’s even more important than ever to ensure that household finances are budgeted accordingly, with enough put aside for debt management issues.
As the recession has deepened, more people are experiencing debt problems as a result of their poor debt management. This has been enphasised by the increased number of redundancies and shortage of jobs – with many companies shedding jobs.
As people’s finances are stretched even futher, many are resorting to pay for their household gas and electricity bills with their plastic – amassing quite large credit card debts in the process.
Ivan Cooper, Chairman at leading debt management company Chiltern, said: “The risk of overstretching yourself, and developing debt problems, is increased if you develop large overdrafts and credit card debts each month by paying for everyday living costs in this way.
“If you are gradually going further and further into the red each month, the best way to get out of debt is to seek impartial debt advice from a reputable organisation. These will be able to alleviate your debt problems by recommending the best solution for your particular situation.”
Reputable debt help organisations, who specialise in providing free debt advice, include The Debt People, Hamilton Locke and Chiltern.
These will be able to assess your circumstances quickly and offer a range of ways to get out of debt – i.e. by offering simple budgeting and debt advice, or by recommending a professional debt help solution.
Professional solutions include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) and Trust Deeds amongst others.
A Debt Management Plan (DMP) is an informal agreement between you and your creditors. It involves working out how much you can realistically afford to repay towards creditors, once your living costs have been accounted for.
Debt management plans simplify finances, as one monthly payment covers all repayments towards your unsecured balances (personal loans, overdrafts, store cards and credit card debts etc). Reputable debt advice organisations should also be able to negotiate on your behalf to reduce or freeze the interest and charges to your accounts. Debt management makes the payment of balances more affordable, as repayments are scheduled over a longer period of time. However, if your situation improves you can increase your monthly payment amount to repay debts quicker.
An Individual Voluntary Arrangement is a solution for people in financial difficulty and offers an alternative to bankruptcy or informal arrangements (i.e. Debt Management Plans). An IVA requires a legally-binding agreement between a you and all of your unsecured creditors. As long as you maintain your payments towards the IVA, you are protected from any further action by creditors.
This means that you cannot be taken to court or made bankrupt, and creditors cannot recover any more money than agreed under the terms of the contract. IVAs are repaid over a fixed period of time (usually within five years) after which time all remaining unsecured balances are written off.
For immediate debt advice, or for further information on debt management plans and IVAs, please call the number at the top of this page.