Deal with debt
Managing our personal finances can be a daunting task. In these difficult economic times many of us feel weighed down by loan repayments and uncertain circumstances, writes Charlie Weston
DEBT management has become an unfortunate fact of life for many households throughout the country.
It's a harsh reality that many household incomes have suffered a reduction of late and this sudden decline in income is increasing the burden of debt repayments.
While all debts need to be repaid at some stage, both borrowers and lenders need to be realistic when it comes to affordability and the time it now takes to make the repayments, according to Ciaran Phelan of the Irish Brokers Association
He advises households not to bury their heads in the sand when it comes to family finances.
"You do not have to be in serious financial trouble to take action. If you find that you are constantly in the red or that there's a risk of you missing loan repayments then you need to act immediately. I would also advise people to remember that falling into arrears with lenders can have a serious impact on their credit rating."
Here are some tips from the IBA:
It sounds simplistic but household budgets are a sure way to get a clear picture of where you stand financially and what steps you will need to take to achieve your financial goals i.e. repay debts, save for the future, etc.
Listing the entire incomes and expenditures of a household, and prioritising debts will enable you to use your money wisely.
People should also consider opening up a budget account -- particularly those with families where certain times of the year are considerably more costly than others e.g. back-to-school times, Christmas and holidays.
Budget accounts are available from certain banks and credit unions and they allow people to spread the cost of their expenditures over a 12-month period.
This ensures that people are prepared for the foreseeable expenses and that no one month of the year is particularly financially crippling for a household. These accounts will also ensure that you do not fall into arrears on your debt repayments.
Whether it's apathy or a lack of awareness, Irish consumers are renowned for not claiming their entitlements.
Bin service charges, mortgage relief, rent relief, medical expenses -- every year thousands of people do not claim their entitlements to these reliefs.
People should educate themselves on what they are entitled.
While filling out forms and collating receipts may seem tedious it is never as time-consuming as you may initially think it is and could result in your being able to collect hundreds, if not thousands, of euro in tax rebates.
The Mortgage Arrears and Personal Debt Expert Group recently published a series of recommendations aimed at tackling the immediate problems facing people who are either falling behind with their mortgage payments or are at risk of doing so.
The recommendations published are based on a five-step process which should apply not just to those struggling with mortgage debt, but with all household debts.
Communication between lenders and consumers is imperative and is the first step which everyone should consider when tackling debt.
Following on from an initial communication, the consumer needs to arrange to sit down with each lender to go through their financial situation and assess what loan terms can be renegotiated to ensure they are both acceptable by the lender and affordable to the consumer.
These terms should then be reviewed periodically to ensure that they are still suited to the individual's financial situation.
Lenders are willing to work with people who communicate with them -- they understand that in many cases people cannot repay money they do not have.
For those whose credit ratings have fallen into disrepair the best advise is not to lose hope.
Your credit rating can be mended if you take action to do so.
While credit impairment is often a result of poor money management on the part of the individual, sometimes people's credit rating can fall into disrepair because of various events that have affected the financial affairs of the person through no fault of their own.
Some life-changing events such as loss of employment, divorce or separation can result in a damaged credit history for people and can be the main stumbling block that many of these people encounter when attempting to restructure their finances through the banks.
Experience within the industry suggests that many of those with a damaged credit rating learn from their mistakes, amend their spending habits and ultimately repair their credit profile.