With many people losing their jobs at the moment that are going to be a lot of cars debt problems, where people cannot afford the repayments on their cars. What should you do if you are in this situation?
Cars Debt - What Type of Debt?
When cars are purchased they will usually be financed either with a loan secured against the value of the car (motor finance) or by a personal loan. This post is concerned only with cars financed with a motor finance loan secured against the car.
Cars Debt – What Should You Do?
If you are having trouble making the payments on your car loan then there may be things that you can do. Investigate whether it is possible to re-finance the loan over a longer period – this could cut the payments quite significantly.
If you are unable to meet the payments and can’t refinance then you need to speak to the loan company urgently. Unless you can agree a payment holiday with them they will take the car back. Negotiate with them to get the best terms that you can – if you volunteer to give the car back you will probably end up owing less than if the loan company have to pursue you with bailiffs.
Shortfall Debt and Bankruptcy
If your car is taken back by the loan company and the amount that they raise from selling it is less than the value of the loan you will be left with a shortfall debt. This is just like any other personal debt (credit card, personal loan) and the loan company can and will come after you for it. If you are considering bankruptcy then it is important to realise that a secured motor finance loan will not be included in the bankruptcy but a shortfall debt would be. Therefore if you think that you are going to declare bankruptcy it is important to hand the car back and get the shortfall debt established before you declare bamkruptcy. If you don’t, you could end up with a debt that is not included in your bankruptcy.
If you’re in serious debt you are likely looking for someone or something that can sort out your debt fast – desperately seeking debt fixers! There are people that can help you, but the solution won’t always be quick or easy.
Debt Fixers – What Are Your Options?
Doing it yourself – if your debt problem is not very serious then you may be able to sort it out without any help – do a thorough budget, increase your income, and make a plan to pay off your debt.
Getting the help of debt counselors, debt management companies, or looking at debt consolidation. Debt counselord and debt management companies may be able to help you by negotiating with your creditors, getting interest and fees reduced or frozen. A debt consolidation loan might enable you to reduce your monthly payments to the point where you can afford to pay off your debt over the long term.
Legal solutions to debt including chapter 7/chapter 13 bankruptcy in the USA (bankruptcy or IVA in the UK) should be considered in only the most serious of cases. They will have a long-term affect on your life and you should consider other options very carefully before committing to one of these methods.
Conclusion
Take a look round this site for more information on common “debt fixers”! Take as much advice as you can but don’t ignore the problem – it will only get worse.
Tags: Bankruptcy, Debt Advice, debt fixers, Debt Solutions
There is a lot of talk about debt these days, and a lot of ill-informed comment about why people get into debt. Many people that don’t have any debt seem to be very angry about anyone that does. Most people that get into debt problems are not just reckless, and some are completely blameless. Understanding why people have debt problems is key to understanding how they can be helped (or help themselves) to avoid debt problems in the future.
Reasons For Debt
Each person’s circumstances will be unique of course, but I think it is possible identify some overall categories:
1. Debt caused by events. Perhaps your finances were OK until you lost your job or faced crippling medical bills.
2. Taking on someone else’s debt. Perhaps your partner ran up large debts without telling you and/or forced you to sign for joint loans. If they managed the finances you could be liable for any debts that they run up on things like joint accounts.
3. Spending to make yourself feel better. Many people use money and spending to compensate for some other lack in their lives. This will almost always lead to financial problems and will not cure the underlying problem.
4. Spending to make other people happy. Closely related to the above point, some people believe that they can only have a relationship/friends if they lavish gifts on people.
5. Just being stupid with money. This is the category that some people seem to think all debtors fall into. It would be foolish to deny that they exist but there is usually some other reason why people behave in this way.
Curing the Disease, Not the Symptoms
A lot of information on getting out of debt seems to focus on the detail of budgeting/paying off debt etc. Although this is valuable it ignores the real root of the problem. Unless your debt problems have been caused solely by unfortunate circumstances/the actions of others then you would be well advised to try and sort out the cause of your debt/spending addiction. If you don’t it will eventually repeat itself.
Tags: causes of debt, Debt Advice, Debt Problems
