1. Topic 4
Know how financial difficulties can happen and understand their consequences

2. How to prevent financial difficulties
Plan your finances
Pay for essentials
Self control
Stay in employment

3. Overspending
This means spending more that you earn or have going in to your account
You may end up having to incur charges pay interest on what you have borrowed
Credit card interest keeps going up and up if you never pay it off

4. Solutions for Overspending
Use an overdraft facility but only on for the short term
Ensure the overdraft is authorised
Un authorised overdrafts can be extremely expensive
A credit card can be used as a solution but short term only – be careful they can be an easy way to overspend if you are not disciplined
Make sure you pay more then the minimum payments on your credit cards

5. Failure to pay You will incur charges D/D or S/O may be rejected
Reminder letters also carry a charge
If you fail to pay this can affect your credit rating for future lending

6. What is meant by financial difficulties?
When income does not cover expenditure

7. Causes of financial difficulties
Loss of employment
Serious illness
Starting in full-time education
Relationship breakdown
Bereavement

8. If you are finding things a struggle
Contact your lenders asap
Seek help from the bank and the Citizens’ Advice Bureau
Debt Advisory Service
Debt Advice Trust
Look at FSA Websites

9. Solutions lenders may be able to offer
Lower repayments
Lengthen the loan
Putting interest payments on hold

10. If you don’t face your debt things can ‘snowball’
Don’t run away you will be found eventually
See a debt advisor they will act in your best interests
Legal action can be taken out on you

11. IVAs Individual voluntary arrangement
If you owe your creditors money an advisor will do their best to draw up a suggested plan to get you out of debt
Creditors want to get their money back so they will accept a reasonable repayment plan

12. Bankruptcy
A legal procedure that allows an individual to clear their debt
Consequences – you will lose some of your treasured possessions
You may not be able to apply for certain jobs
You may have to wait quite some time to get credit again
You are appointed a trustee to deal with your finances a ‘trustee in bankruptcy’
Bankruptcy is on your cred record for 6 years

13. A debt relief order A form of bankruptcy You need to owe less that 15K
Debts in some cases can be written off
It only stands for 12 months

14. The difference between a lender and creditor
Lender refers to i.e. mortgage lending
Creditors lend money with out security (unsecured) i.e. personal loans, credit cards, overdrafts

15. County Court Judgements (England)
If you owe money you can be taken to court and you may be asked to pay back your debt a notice is placed on your credit record and this can seriously affect your future applications to borrow money – you are classes as an unreliable payer

16. Repossession
An action that a mortgage lender will take against you if they have exhausted every possibility to help you
The lender will sell the house and take what is owed to them - you can end up with very little back from sale in some cases absolutely nothing some people don’t even manage to clear their debt to the mortgage provider