How Can I Get Help With Debt In Scotland?
Getting help with debt in Scotland The help available for those struggling with debt in…
What Is Consumer Debt?
According to the Cambridge Dictionary, Consumer Debt is the amount of money owed by people for things they have bought but not yet paid for.
Futhermore, according to Investopedia who aim to simplify complex financial information, Consumer Debt consists of personal debts that are owed as a result of purchasing goods that are used for individual or household consumption.
Credit card debt, student loans, auto loans, mortgages, and payday loans are all examples of consumer debt.
These stand in contrast to other debts used for investments in running a business or debt incurred through government operations.
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Understanding Consumer Debt
Consumer Debt results in increased consumer spending and production. Thereby growing the economy, and achieving a smoothing of consumption.
For example, people borrow at earlier stages in their lives for education and housing. They then pay down that debt later in life when they are earning higher incomes.
You can view debt used for education as a means to an end. The education allows for better-paying jobs in the future. Which creates an upward trajectory for both the individual and the economy.
What Is Consumer Interest?
Consumer interest is interest charged on consumer credit accounts such as personal loans, automobile loans and credit card debt.
Unlike mortgage interest and some interest charged on student loans; consumer interest from personal loans, credit cards, and other debt is a nondeductible tax expense.
However consumer interest, like all interest expenses; is tax deductible if the consumer uses the proceeds of consumer debt to invest in income producing property.
The distinction between consumer interest and other types of loan interest is:
Consumer interest, consumer credit card debt, consumer loans and other consumer debts are not considered investments.
Thus consumer credit card debt can be a useful tool when used to purchase investment real estate.
Consumer Interest vs Consumer Debt
Consumer debt and consumer interest are often used interchangeably, however consumer interest is a subset of consumer debt.
The consumer credit agreement between the borrower (consumer) and lender provides for both consumer interest as well as other charges such as fees, penalties, finance charge and loan origination fees.
Although consumer interest can be charged regardless of whether or not it is secured by real property; It is often charged only on consumer loans that are not secured by real property.
Consumer Interest – When Is It Tax Deductible?
Interest can be deductible. If you use the proceeds of consumer interest to purchase income producing property.
This includes consumer loans, consumer credit card debt, consumer mortgages and all other consumer debts secured or unsecured when used to purchase investment real estate.
The proceeds of consumer interest used to purchase consumer goods or consumer services are not tax deductible.
For example you may use consumer credit card debt to pay for consumer goods. You may use consumer mortgages to finance consumer real estate. But the interest paid on consumer loans for personal use is nondeductible.
Consumer Credit Examples
A credit card is considered consumer credit. Because you use it to purchase services and material goods instead of investment products such as real estate or stocks.
You are allowed to spend a predetermined amount. You can use it for everything from dining out to home furnishings, electronics or other material goods.
If you have a line of credit with a specific store; It is also considered consumer credit because it works in much the same way.
Options For Paying Off Your Debt
According to gov.uk you can pay your debts in instalments by setting up:
- a Debt Management Plan; an agreement with your creditors managed by a financial company
- an Administration Order when you’ve had a county court judgment (CCJ) or a High Court judgment (HCJ) against you for debts under £5,000
- an Individual Voluntary Arrangement; managed by an insolvency practicioner
You can also get temporary protection from your creditors through the ‘Breathing Space’ scheme, while still making repayments.
You may also have the option of reaching an informal agreement with your creditors.
Click here to find out more about how to best manage your debt.
Click here to find out more about IVA agreements, what they are and how they work.
We Can Help With the Following Types of Debt
- Benefit overpayments
- HMRC debt
- Council tax
- Loans/overdrafts/credit cards
- Utility/company bills
- County Court Judgements
- Catalogue and store cards
- Rent/gas/electricity arrears
- Payday loans
Designed for people struggling with their finances these solutions allow you to take back control. At Consumer Debt Help, our mission is to get you out of debt.
Visit our website at www.consumerdebthelp.info and complete our quick survey to see if we can help you become debt free. Stop struggling and take that step, you owe it to yourself!