In today’s society, you’re lucky to find someone that’s not got some form of debt, whether its loans, mortgage, credit cards or online store accounts. Many of these people are able to manage their debts, and continue to meet their repayments on a regular basis.
However there are also many people that can’t manage their debt, and are struggling to cope with the ever increasing interest payments and late fees. Small debt amounts will grow into bigger debts if they’re ignored, and choosing to bury your head in the sand is nothing short of crazy when it comes to facing the problem.
Small Debts, Big Problems
Smalls debts are just as important as big debts, and some consumers believe that credit providers won’t bother collecting small sums – this couldn’t be further from the truth.
Leaving small debt amounts that you believe will go unnoticed will actually end up costing you more. Credit providers are allowed to recall the debt at any time, and can also slap on huge amounts of interest and late fees if they’re believe you’re not able to pay it back.
Furthermore, once a credit company hands over a late payment or unpaid loan case to debt collectors, the collectors will also add a variety of costs, fees and charges to make the collection worthwhile, no matter how small.
For example, these costs can include charges to ‘open the case’ and determine the next course of action, tracer fees (finding the debtor), the drafting of the legal documents and letters, phone calls and texts sent to the debtor.
Interest will also accumulate on all of these debt collection charges, and added together will all the previous fees, a small, unpaid debt can turn into a mighty financial problem.
Credit Rating and Repossession
Although debt may be hard to acknowledge, especially to family and friends, the problem won’t go away, especially if you don’t confront it. The longer a debt is left unsettled, the harder it will be to pay back – there is no other way about it.
Not paying back your debts can have an extremely negative impact on your credit rating too. By hiding away from your debts and missing repayments, your credit rating will decrease very quickly.
This means that lenders will refuse to give you a loan or any other form of credit in the future. Credit agencies share information, so your credit rating will be open for all to see, especially banks if you’re looking to get a mortgage.
Not paying back your debts can also have a direct effect on your family and loved ones. If you fail to get your finances in order, then the problem may escalate to repossession of assets. This means any property in your name can be repossessed in order to meet the repayment of the debt. This also includes cars, saving accounts and any other asset that can wipe off large portions of your debt.
In comparison to the previous quarter, the number of accounts in financial danger has topped 17 million, according to the National Credit Regulator’s latest statistics.
Post provided by Tony, a UK finance blogger on behalf of IVA expert, who offer IVA help & advice.