Deep in debt? No need to bury your head in the sand

Published on Friday 4 January 2008 20:27

WITH debt in Scotland, and across the UK, expected to hit record levels this year, people should take action now to get their finances in order.

Various figures released this week all point to doom when it comes to debt, sequestration (the Scottish term for bankruptcy), and Protected Trust Deeds (PTDs), an alternative to bankruptcy agreed with debtors.

More than 14,000 Scots will be made bankrupt in 2008, according to accountants and business advisers PKF.

The rising number of people in financial straits is seen as inevitable given the tightening in the availability of credit on the back of the subprime crisis in the United States and the expected stagnation or retreat of house prices.

Moneyfacts.co.uk, an independent provider of financial information, has put together pointers to help those who have burdened themselves with more debt than they are comfortable with in 2007 and want to regain control this year.

Julia Harris of Moneyfacts.co.uk said: "Many people are predicting that it is going to be a tough year in the personal finance world, so now is the time to get prepared for the rough ride ahead.

"If you find that your financial problems are severe, then you should seek free confidential advice from your local Citizens Advice Bureau. Once you know exactly what you need to borrow, look at the refinancing solutions that are out there to help you to regain control of your finances."

People with credit cards and store cards – which can have interest rates as high as 20 per cent – should check out 0 per cent balance transfer deals.

Anyone who transfers their balances, should then close the old card accounts and cut up the new card to stop them being tempted to use it for purchases.

One option that may be worth considering is a credit card being launched by Bank of Scotland (BoS) on Monday that the lender says offers the best all round 0 per cent deal on the high street.

The BoS Plus Credit Card provides 0 per cent for 13 months on balance transfers (with a 3 per cent balance transfer fee); 0 per cent for six months on purchases; a typical APR of 15.9 per cent; and no annual fee.

Alternatively, those paying high rates of interest on numerous credit cards and store cards may want to pay them off to be left with a more manageable single monthly repayment. An unsecured personal loan could be the best route as it has the advantage of an agreed interest rate and monthly repayment, both of which are fixed for the full duration of the agreement.

Harris said: "The new year will undoubtedly pick up where 2007 left off, with some 0 per cent credit card balance transfer deals and low rate loans available for those with a spotless credit history. The problem is that, because of the credit crunch and increased bad debt suffered by lenders, consumers with a less than perfect credit history will find it more expensive to borrow money."