Author: Admin Damo

Loan Debt – All You Need to Know with Tips, Advice, FAQs & More

Loans can be a great way of getting you out of a financial bind or funding an emergency purchase.

However, it’s important to not be reckless when it comes to taking out loans as they can definitely lead you to financial ruin.

Today, I’ll be looking at how loans work, how you should go about applying for personal loans and how you can determine if they’re suitable for you.

Struggling with Personal Loan Debt

Personal loans are an attractive option for many people to fund their luxury purchases.

It’s important to keep yourself in check because taking out loans without thinking it through can land you in a lot of debt. You’ll find it’s very easy to get into debt but very hard to get out of it.

If you’re struggling with your loan repayments, you should speak to your lender immediately. Get them to understand your situation; provide as much proof as you can.

I always think it’s a good idea to get in touch with your lender before you miss your monthly repayment but you feel like there’s a chance that you will.

You might be able to get them to agree to a payment break or some other form of help such as lowering your monthly repayments.

If you’re unable to pay your loan arrears and you don’t discuss this with your lender, then you will be sent a default notice.

A default notice is a letter which allows you to catch up on your arrears. You will most likely be given 2 – 3 months to respond to it and make up for your loan arrears.

If you fail to do so and miss 2 – 3 more payments, your lender will start taking action against you. This could be:

• Letters and telephone calls from them.
• Additional fines, charges on your loan or an increase in the interest rate on it.
• Court action such as a County Court Judgment (CCJ) against you.
• Passing your debt onto a debt collection agency.

Once again, I have to stress that if you fail you’re struggling with your monthly payments or if you feel you’re not going to be able to make your next monthly payment, you should get in touch with your lender immediately.

Communication is key. Not only will your lender understand but they might offer you options to help you as well.

These could be:

• Reducing the amount you have to pay in each monthly repayment for a few months.
• Offering you a payment break from your monthly repayments for a few months.
• Ensuring that the payment break won’t have a negative effect on your credit score.

What Are Some Things I Should Keep in Mind when Applying for a Loan?

It’s very important to know what you’re looking for when you’re in the market for a personal loan. If you enter into a personal loan agreement without fully understanding it, it could lead you to financial troubles.

Here are some things you should look at when opting for a loan:

The Interest Rate 

Most loans come with an advertised interest rate (also known as the representative APR). This is typically the standard interest rate that is given to individuals that opt for that loan.

However, you may not always get the same interest rate as the representative APR. The interest rate you’ll be offered will depend on what type of loan you’re getting (secured loan, unsecured loan, mortgage loan, homeowner loan, guarantor loan, etc.), how long the duration of your loan is going to be and what your credit score is.

Be sure that before you apply for a loan, you check what the interest rate you’re being offered is.

Interest rates are important to know about as they have a huge effect on the total amount repayable to your lender. High interest rates will lead to you paying a much higher amount of money than what your original loan amount was.

The Term (or Duration) 

Of course, the duration of your loan is going to matter because it will determine the amount of time over which you’ll be paying it off.

It may seem tempting to have a long term so that you pay a lower amount each month but in reality, the longer term you’ll have, the more you’ll be paying off in interest overall.

Thus, when it comes to loan terms, it’s better to have them as short as you can afford them to be.

Compare Loans and Lenders 

This goes without saying but you should always compare loans offered by different lenders and compare them in order to get the best possible deal for yourself.

Make sure that lenders you’re approaching are authorised and regulated by the Financial Conduct Authority (FCA).

If you have a bad credit score, your option may be a lot more limited. You may have to look at specialised lenders and the interest rates you’ll be offered will be a lot less competitive.

It’s important to find the right balance between a lender who’s offering you a good deal and them having requirements which mean that you’re application is likely to be accepted.

When you want to borrow money and are looking for a loan, it may be tempting to apply to several lenders. I highly suggest that you avoid doing this as this will affect your credit rating in an extremely negative way. Always choose a lender beforehand and only apply to that single lender.

Some lenders may require to do a credit check on you before they provide you with a quote. If this is the case, make sure you ask them to do a “soft search” as this does not show up on your credit file.

Be Aware of What You Will Owe 

This ties back up to the rate of interest but it’s important for you to calculate what the total amount repayable by you is going to be.

Of course, it’s going to be more than the original loan amount but you have to calculate whether it’s worth it to get the loan or not. You don’t want to be paying 90% or sometimes even 100% more than what you originally borrowed.

You can check out a loans calculator online which can help you determine how much you’ll be paying back depending on your rate of interest and your loan duration.

Conclusion

Loans can be tricky to apply for but as long as you look out for unsuitable rates of interest and do a thorough assessment of your finances, you can find one that’s suitable for you.

Just be sure that your financial circumstances will allow you to pay it back comfortably.

Going without a car is almost impossible these days so when you are struggling to make payments on your financed car things can get stressful. This guide provides an overview of all subjects related to car finance so you can access all required information easily.

We have covered an array of articles related to car finance debt so that you know exactly what to do if you’re struggling to make payments on your financed car. These articles range from how to get out of a car finance agreement, can your car be repossessed, rules on selling your car if it is financed and how you would go about getting a payment break. Whatever it is, the information below should equip with everything you need to feel confident about your car finance situation.

Council Tax Debt – Everything You Need to Know, Tips, FAQs, Guide & More

If you happen to miss a council tax payment, you will be in ‘arrears’. This means that you now owe a debt to your local council.

Council tax debts should be treated as a priority and if this happens to you, you should not wait for your council to contact you.

You should reach out to them as soon as possible to ensure the matter does not escalate.

Today, I’ll be discussing how you can deal with council tax arrears and what you should be doing if you’re struggling with it.

What Happens if You Don’t Pay Council Tax?

The amount of council tax you pay usually depends on a number of factors such as:

• The value of your house
• Your age
• Your income
• Who else lives with you and how many people you support financially

If you’re having trouble paying your council tax, it’s very important that you contact your local council and make them aware of this.

Your local council has certain extra-legal powers and they can take legal action against you if they think you’re deliberately avoiding the debt.

If you contact them and explain your situation to them, not only will this prevent them from taking legal action, they might even help you develop a payment plan that could be more affordable to you.

For example, you can opt to pay off your council tax over the course of 12 months rather than the usual 10 that is mentioned in the letter that you originally received.

If you’re struggling with making payments and need help, I highly suggest seeking debt advice from an independent charity. They have trained professionals that will help you for free.

You may be turned onto options by them that you had not been aware of. They will also help you understand how you can apply to these options too, e.g. if you opt for an Individual Voluntary Arrangement, they can help your plan the initial proposal.

If you opt to make payments towards your council in the course of 12 months, then a trained professional can also give you debt advice on how to schedule your payments.

What Happens if You Miss Council Tax Payments?

Your local council has extra-legal powers which is why you should always treat council tax debt as a priority debt. Not only can they send bailiffs to your home but they can even take money from your wages or support allowance in order to make up for the debt.

Once you are 14 days late in making your payment, you will be sent a reminder letter by your council. If you make your payment within 7 days of receiving the reminder, you can continue with your future payments as normal.

However, if you fail to make the payment within 7 days, this can lead to severe consequences. Your local council could take you to court and the local authorities could ask you to make the payment for the rest of the year all at once.

Missing a payment can also result in bailiffs visiting your home, seizing your possessions and selling them off in order to pay for your debt.

Your local council could also take you to court and get a council tax liability order against you if you have unpaid council tax and you keep refusing to make payments. Having a liability order on your debt means that your debt can never become unenforceable.

I highly suggest that if you feel you’re going to be missing payments, you should contact your council immediately and explain your situation to them.

It’s a good idea to send them a copy of your expenditures and income in order to make them understand. If you ensure them that you’re doing all you can to pay off your debts, it’s unlikely that they will pursue legal action against you.

What is the Difference Between Tax Credit Debt and Council Tax Debt?

Tax credit debt occurs when you have been overpaid in tax credits or Universal Credit. This can occur if your income fluctuated and HMRC overpaid you in tax credits. In this case, you would have a debt to HMRC.

Council Tax debt occurs when you have not made payments towards your local council.

Both council tax debt as well as tax credit debt should be treated as priority debts. You can read my post about Tax Credit Debt to find out more about it.

Can You Go to Jail for Council Tax Arrears?

You cannot be imprisoned for Council Tax arrears in Scotland, Wales or Northern Ireland.

However, in England, you can be imprisoned for up to 3 months if you keep refusing to pay the money you owe. Keep in mind that this is extremely rare and it will only happen if the court feels that you can afford to make the payments but you’re deliberately refusing to do so.

Can Bailiffs Force Entry for Council Tax Debt?

Bailiffs can only enter your home if they have been inside previously and you’ve made a controlled goods agreement with them.

A controlled goods agreement states that bailiffs have the right to seize your goods and sell them off if you fail to make your payments towards your debt.

Please note that even though bailiffs have some extra-legal powers, they also have to abide by a strict set of rules. Being aware of these rules can help you immensely when dealing with aggressive bailiffs or just any bailiffs in general.

If you need help with bailiffs, you can receive help right away to deal with them if they’re attempting to contact you for council tax arrears.

How Long Can You be Chased for Council Tax Debt?

Just like most other types of debt, the limitation period on council tax in arrears is also six years.

This means that if your council does not contact you in regards to your debt for six years and you have not made any acknowledgement or payments towards it for six years, then it will become unenforceable.

While this is most certainly the case, it’s highly unlikely that your local council will let this happen.

They will most likely always inquire and contact you if you have unpaid council tax. If you refuse to pay council tax then your council will most likely pursue court action and get a liability order. This will stop your council tax arrears from ever becoming unenforceable.

You can read my post about how long you can be chased for council tax arrears and what options you have if you feel your debt has indeed become unenforceable.

What is a Council Tax Band?

Your Council Tax bill is charged to you in “bands”. Bands are determined by what the value of your house was in 1991.

Houses that are more expensive have a higher band whereas cheaper homes have a lower band.

Band A is the cheapest and Bands H or I are the most expensive. The band of your house will be mentioned on your council tax bill.

If you feel that your house has been put in the wrong band, you can contact your local council and inform them of this. This way you could get it changed to a lower band and potentially save money by getting a lower council tax bill.

However, you should keep in mind that this isn’t always guaranteed and there’s a chance that your house could even be moved to a higher band.

Can My Council Tax be Reduced or Written Off if I’m on Benefits or have a Low Income?

You can definitely qualify for a council tax payments reduction if you have a low income or are on benefits.

Different local councils have different criteria that determine who qualifies and who doesn’t.

You are entitled to a 25% single person discount if you’re living on your own. There are some people that don’t count so if you’re living with a full-time student or someone who is severely mentally impaired, you can still qualify for the discount.

If you’re above pension age (65), you can also qualify for an extra reduction in your council tax bill.

You can also have the bill reduced by one band if you have someone in your house who is disabled and the property has been adapted.

What Should I Do if I Think My Council Tax Bill is Wrong?

If you feel you are being treated unfairly or if there has been some mistake with the calculation of your council tax bill, you should first contact your local council. Make a complaint and tell them why you think you’re being treated unfairly.

Give them a maximum of 12 weeks to comply with your request. If you are unsatisfied with their reply or if they don’t reply to you at all, then you can opt to seek debt advice from a registered charity such as StepChange.

They will tell you what your options are and help you navigate through whatever option you choose as well.

Most likely, any registered charity you go to will tell you to complain to an authoritative body.

If you’re in England, this authoritative body will be the Local Government Ombudsman.

Conclusion

Struggling with council tax arrears can be a tough position to be in since they are priority debts that have severe consequences if you don’t pay them.

However, you must keep in mind that as long as you’re cooperative with your local authorities and assure them that you’re doing all you can to pay your taxes, they will provide you with affordable options.