Topic 11 - Dealing With Debt Flashcards
1
Q
Why do ppl fall into debt?
A
- changes in personal circumstances
- lose job
- mortgage, food + energy costs may inc.
2
Q
Actions ppl can consider when dealing w debt
A
- get free impartial advice
- use budget to work out what they can repay
- negotiate w lenders affordable amounts to repay
- inc. income e.g. sell assets (car)
3
Q
Advisory organisations who may give free impartial advice on dealing w debt
A
- MoneyHelper
- StepChange Debt Charity
- Citizens Advice
- National Debtline
4
Q
How may ppl inc. their income to repay debt?
A
- claim all benefits they’re entitled to
- take on more work
- sell an asset
5
Q
How can ppl w a good credit rating change products to deal w debt?
A
- can switch credit card debt to another provider not charging interest on balance transfers
- stops original debt growing + gives time to repay
6
Q
Factors to consider when ppl struggling to repay a loan extend term of loan
A
- dec. monthly repayments but inc. overall cost of loan
- maybe set up or arrangement fees for new loan
7
Q
What is a consolidation loan?
A
- loan used to pay off several diff. debts
- monthly repayments made to loan provider
8
Q
Considerations before taking out a consolidation loan
A
- full costs involved in new loan
- must afford repayments on loan if they are to clear their debts
- overall cost must not be > cost of individual loans
9
Q
What to prioritise when dealing w debt
A
- most expensive debt 1st
10
Q
What ppl set up debt management plans?
A
- ppl w many diff. debts
11
Q
How do debt management plans work?
A
- person pays DMC each month who splits money between those the individual owes
- free from most charities
12
Q
What is a debtor?
A
Someone who owes money
13
Q
What is a creditor?
A
Someone who is owed money
14
Q
Advantages of debt management plans
A
- easier to manage debt
- longer to repay what owed
15
Q
Disadvantages of dept management plans
A
- DMCs only deal w non-priority debts
- creditors don’t have to accept plan
- debt takes longer to clear