5 sensible steps for those in debt.
16th May 2019.
In recent weeks we have written about the financial difficulties of both UK businesses and individuals.
Around 8 million people in the UK considered to be “in debt”.
Just see our recent posts such as those below.
UK business in significant financial distress
Three in British adults’ personal finances ten go into the red
What are the challenges facing those in debt?
For many Britons is it hard to get out of that cycle of debt. The average household has around £900 in outstanding debts, and every time they get close to clearing balances and getting back in to a good financial position, they can find themselves falling back into the cycle again due to increased living costs or a personal financial emergency.
It certainly does not help that loan companies and gambling firms advertise heavily on TV and the high street, making it tempting for anyone to take out high cost loans or get seduced into gambling as a “quick fix” to their problems.
Another main challenge is the catch-22 of credit. Those most in need of a cash rescue, find it the hardest to be approved for that low cost loan that would get them out of the cycle. Those with bad credit fuind it the hardest to be successful in being approved for low interest loans and end up paying the more in borrowing costs and exacerbating the problem.
The FCA has done a good job at addressing the high cost credit industry over the last few years, but the result means that there are millions of people in the UK who cannot access finance, let alone affordable finance. The options that are available have strict criteria, high interest rates or the individual risks losing collateral.
How has this differed from the past?
The UK has traditionally had a problem with household debt which is usually cyclical and heavily influenced by the recessions of 1987 and 2008. Before a recession, debt levels build up and then when the recession strikes, both banks and households become more cautious and try to pay off existing credit, rather than take out new credit.
Today, the average household is faced with much higher costs for purchasing, renting and running a property, with even greater access to consumer goods such as fashion, electronics, computers, mobile phones, food and other must-haves, which cost a lot and are deemed a necessity, but would not have been 30 years ago.
What options are available to those with debt?
Using payday loans and pawnbrokers can only exacerbate the cycle of debt for many households and provide more of a quick fix rather than a long term solution.
Finding a way to consolidate debts can be useful, since it puts all your outstanding debts into one single payment, whether it is secured against your home or using guarantor loans with the help of another beneficiary.
Debt charities such as StepChange do fantastic work and offer real solutions and education to people who have been struggling with debt.
For some, receiving a large inheritance can be an effective way to consolidate all the debts and finally get out of the cycle, but any excess funds should be used carefully to avoid falling back into the trap. But again that is not something that can be planned (legally) or should be relied on.
What changes do we expect to see?
The FCA is making progress in tidying up the credit industry, including the price cap in the payday loans sector and the continued reviews of car finance, retail finance and unauthorised overdrafts.
This in turn, causes huge disruption to some businesses that offer financial products. We have seen the likes of Wonga and The Money Shop recently fall into administration.
So there are opportunities for Fintech companies, direct lenders and non-bank institutions to provide loan alternatives and other new ways to not only help people work their way out of debt, but also rebuild customer credit ratings and also educate people on their financial options.
So in the future, more options should be available.
What can be done now?
The damage caused to people’s lives by debt can be devastating. But by taking the right action and seeking proper support, rather than burying your head in the sand the worst can be avoided.
The problem is people do bury their heads in the sand. They ignore the problem. Either they are embarrassed or simply in denial regarding their situation. Both Businesses and Individuals who are in debt need to face up to the problem and take action to address the situation rather than leaving the problem to spiral out of control.
In a study of 1,000 UK individuals in arrears, 52% admitted there was a level of shame attached to seeking help with debt. Almost 60% of those questioned blamed this stigma on social stereotyping and their own feelings of embarrassment and inadequacy.
36% were afraid to approach their creditor. So it is important that creditors are understanding and encourage open communication.
Falling behind on payments can be a very stressful time, so it is concerning that so many people may feel too embarrassed to ask for help – something which may further compound the issue.
Debt affects a huge cross-section of people, for many different reasons, so it’s crucial that creditors work hard to understand the issues of every single individual and help them to find a balanced resolution. It is so important for organisations to stand out as approachable and helpful to those who owe money.
This will encourage and enable those in debt to communicate about the outstanding debt.
The sooner their debts are acknowledged and dealt with the better the outcome will be for all concerned. For the businesses and individuals in debt, not only regarding their actual debts, but also regarding their mental health.
5 steps for those in debt now
Below are five steps that can be taken to address the problem. Each situation will be different but by applying the below to your situation and by seeking professional support, usually a solution can be found and the problem mitigated.
1) Don’t stick your head in the sand. Accept the situation.
The stigma of debt is powerful and can hold people back from from facing up to the situation. However the quicker you face up to it, the quicker you can start solving it.
If you were ill, you might avoid going to the doctor but postponing only means you get worse. Really you are only going to get better if you go to the doctors and follow his diagnosis. Its the same with debt.
Getting into debt happens. You can only move on once you face up to it and start the process of solving it. That will help you move towards a fresh start.
2) Ask for help and support
Seeking professional advice is of course important. Professionals have seen every situation and they will know where you can find resources, what the best path is and be able to fight through the jargon and misinformation to help you understand your true position.
But you also need the support of your friends and family. Don’t hide the situation from them, instead let them know. It is understandable that you might worry about the stigma of debt or be worried about letting them down. But you will need their support and they need to know the situation.
Having your family’s support in dealing with debt in daily life is an essential first step. All debt problems are solvable, as long as you ask, so share your worries with them and they will help you through it.
You need the emotional support just as much as the professional advice. You need people who will listen and let you talk.
3) Make a budget
Create a budget plan that is realistic and that you can live.
Look at the money coming in and look at the money going out then being realistic, focus on what expenditure is essential and what can be reduced or eliminated.
As the famous Dickens quote goes – “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Come up with a budget that limits your expenditure to less than your income.
4) Talk with your creditors
Communicate with your creditors as soon as you can. You never know what opportunities to help they offer if you speak to them early on.
By giving them full details about your financial situation, you will give yourself time to get the best advice and create an action plan. You may be able to negotiate lower interest rates or even consolidate your loans.
Also, if you suffer from mental health issues, financial creditors are required to follow by the “Treating Customers Fairly” regulatory and supervisory code which sets out fair outcomes for financial customers.
5) Assess your options
For many, they are not aware of their options when in debt. The debt recovery industry is a mystery and they do not understand what steps can be taken. They may not be aware of their various refinancing options. Or whether they can negotiate a payment plan with their creditor. Often they need a professional to demystify insolvency procedures for companies such as Company Voluntary arrangements (CVAs), administration, liquidations, or for individuals, bankruptcy or Individual Voluntary Arrangements (IVAs). Insolvency proceedings will not be suitable in every situation and will not be right for all businesses or individuals, but in serious situations, when applicable, while they are not painless, they may be the best option for managing debt and can lead the way to cleaning the slate and in the long run regaining financial freedom.
It’s important to properly understand your options as it will cost more time and money if you pick the wrong solution and have to start over.
CPA practices what it preaches
CPA has been working for businesses since 1914 to provide debt collection and credit management services.
We believe in communicating fairly with debtors and encouraging them to communicate directly with their creditors rather than ignore the debt.
We also practice what we preach.
The Credit Protection Association has a policy of turning round invoices as quickly as possible and paying our suppliers as soon as the invoice is authorised. Many invoices are paid in the same week they are received. A large number the same day.
This is true, even if the supplier offers 30 days credit terms.
And we switched from paying most suppliers by cheque, to paying by bank transfer because we want our payment to arrive quickly and for it not to be unexpectedly delayed nor be a hassle to bank.
Why?
Because we are passionate about late payment and want to lead by example.
Do you have a problem with late payments?
If you are a business that in itself is owed money, The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply to businesses on credit help us help you identify the risks. Spot those companies ignoring rules on payment and treat them appropriately.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cash-flow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cashflow.
Don’t let your bankers control you, contact CPA today.
But what to do?
Do you realise you may have hidden capital tied up in your business?
There is no need to run to banks of other finance providers for extra capital.
Do you realise you may have a hidden source of capital within your business waiting to be activated?
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and underused legislation your business could be due huge amounts in compensation that you didn’t even know about.
For years the businesses you sold to were ignoring rules on payment. Now you can be recompensed for their ignoring rules and paying you late.
That compensation could be the cash injection your business needed.
Are you thinking about retiring, closing the business down or going into insolvency? If so this compensation could be an excellent way to maximise the return you get for their years invested in the business.
If you collect the compensation you are due on late payments then you could create a nice nest egg from the business or find the funds to rescue it from insolvency.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hardwork. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
The Credit Protection Association plc (established 1914) has spent 3 years researching the accounting, technical and legal implications of Late Payment Legislation and our staff and retained solicitors probably have as much working knowledge of this legislation as could be found anywhere.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Do you have a problem with late payments?
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply to businesses on credit help us help you identify the risks. Spot those companies ignoring rules on payment and treat them appropriately.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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