What are the different types of consumer debt help

What Are The Different Types Of Consumer Debt

What Is Consumer Debt?

As a consumer, you may find yourself in debt at some stage. It happens to many people. This could be through your mortgage or utility bills, or from unpaid taxes or personal loans. There are many different types of consumer debt.

Basically, you reach this stage after borrowing money from a lender. It could arise from buying a car on credit or even paying for your education. When you are unable to pay the full amount, you get into debt.

How you pay for consumer debt is important. It will affect your credibility in future when you apply for a loan or credit card.

However, consumer debt is on the rise and it may be helpful to be aware of its different types and how to deal with them.

Table of contents:

    What Types of Consumer Debt Are There

    • Credit Card Debt

    Credit cards are a source of consumer debt for many people. It’s easy to spend more than you can afford when you’re able to pay off the outstanding amount every month. However, it’s important not to overspend and always ensure that your purchases are within your means.

    When you borrow money or use your credit card to buy something on credit, consumer debt arises. If you don’t pay this off in full every month then your debt goes up.

    • Mortgage Debt

    A mortgage allows you to buy a property by borrowing money from a bank or lender. You pay back the money, plus interest over a set period of time.

    If you fail to keep up the repayments, you will get into consumer debt. Sometimes events happen in your life that you can’t control. Hence, it’s always best to speak to your mortgage lender immediately if you find that you can’t keep up repayments.

    • Utility Bills

    Sometimes you may not be able to pay your utility bills on time. This could include water, gas, electric or your television licence. If you don’t have enough money in your account to cover the bill, you may be subject to late payment charges or other penalties.

    • Personal Loans

    You might take out a personal loan to buy an item of furniture or an appliance like a washing machine for example. But, if you can’t afford the monthly repayments, your debt will start to grow. You may also face penalties and charges for not paying on time.

    How To Reduce Your Consumer Debt

    If you can’t pay your debt, then you may face penalties or charges. Furthermore, you may even get to the stage where a debt collection agency has authority to recover items. Here are some ways you can reduce your debt.

    Loans

    If you want to reduce consumer debt because your repayments and interest charges are too high, then a consolidation loan may be for you. This is sometimes referred to as a consumer debt management plan and it allows you to pay off all or most of your consumer debt within an agreed period of time.

    Repayment Protection Insurance

    Sometimes unexpected problems may prevent you from keeping up with your repayments. For example, if you lose your job or get sick. In this case, a consumer debt repayment protection insurance policy can be useful.

    Debt Management Plans

    A debt management plan allows you to consolidate all your consumer debts into one consumer debt repayment plan. If you can afford a consumer debt repayment plan of between three and five years, then this could be an effective way to pay off consumer debts fast.

    Personal Insolvency Agreement

    This consumer debt solution involves getting a consumer debt agreement with your creditors. You get to keep all your assets and pay back only an affordable amount.

    Credit cards

    Finally, if your debt includes multiple credit card debts, then you may benefit from transferring any outstanding balances into one account. Then it can be paid off within a fixed schedule from one place, so you are not facing charges from multiple cards.

    Where To Get Help With Consumer Debt

    If you find yourself in consumer debt in the UK and cannot afford to repay the amount that you owe, there are a number of different sources that you can get help from, including;

    1. Citizens Advice Centre, a national charity with local branches. Call to speak to an adviser or chat online.
    2. National Debtline – This free telephone helpline (0808 808 4000) gives free and impartial consumer debt help and support. You can find out about consumer debt and get tips on managing it
    3. Consumer Credit Counselling. StepChange Debt is another free consumer counselling charity.
    4. UK Government support: Council support schemes, Budgeting loans
    5. Debt Relief Order – You can apply for a consumer debt relief order if you are experiencing serious financial difficulties due to consumer debt
    6. Individual Voluntary Arrangement (IVA) – An IVA involves appointing an independent third party to deal with consumer debt on your behalf. You make monthly consumer debt repayments to the IVA, who distribute them between your creditors.

    Conclusion

    In summary, if you wish to improve your consumer credit rating, make sure repayments are made on time if possible for any purchases or loans.

    However, if you are having problems with consumer debt, you need to address it as soon as possible before it spirals further and causes you even more debt.

    By opting for a consolidation loan or management plan, you can move your payments into one repayment area. This can help to take the stress out of having debts in multiple places. However, make sure you are completely aware of how consumer debt relief orders, debt solutions and IVAs work before you take that option.

    Ultimately, the consumer debt solutions are beneficial to creditors in that they get their debts paid back to them at huge profits compared to if you declared bankruptcy.

    Finally, it’s worth knowing that organisations providing consumer debt products are regulated in their activity. This will give you reassurance that you are dealing with a company that is following consumer debt guidelines. Get in touch with one of the consumer debt advice centres for more information.

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