Making Forced Bankruptcy Harder

A much needed law change happened on the Ist October 2015, that went pretty much unnoticed.

Did you know that before that date, if you owed a creditor as little as £750, they could apply to the courts to make you bankrupt?

Implications of bankruptcy

– Any assets such as your car or home could be sold to pay back the debt.
– It will remain on your credit file for 6 years, meaning you will find it extremely difficult to obtain credit, loans or a mortgage.
– You will not be able to act as a company director.

Bankruptcy was meant to be a last resort, for people or companies that were insolvent to the point of being unable to pay their debts, debts that were usually a large sum of money owed.

Unfortunately some took advantage of this situation, and the mere threat of applying for bankruptcy from a creditor to a debtor over as little as £750 was enough to cause serious implications and further financial hardship.

As of 1st October 2015, the law has now changed and the amount of debt you would need to owe before anyone can apply for bankruptcy against you, is now a more realistic £5000.

A welcome change.

For further information on bankruptcy in the UK Stepchange.org

From PCP to Logbook Loans, Car Loans Made Clear

 

From PCP to logbook loans, there are a myriad of loans on offer attached to cars, although it can be daunting, we thought we should take a look at each one.

Personal loan

A personal loan is a much favoured way of buying a car, you own the car outright with no mileage restrictions. Unfortunately borrowing from a bank, building society or other lender on a personal loan also makes it an unsecured loan, meaning if you default on the loan, unlike dealer finance where only your car can be repossessed, any of your assets can be seized.

PCP (personal contract purchase)

With PCP, there is a deposit to pay, plus monthly repayments usually from 12 to 36 months. At the end of the repayment term, there are 3 choices-
1-Return the car to the dealer
2-Keep the car and pay the final balloon payment, this is a payment which will have been agreed upon and written into contract, when taking out the PCP. The GFV (guaranteed future value)
3-Use the value (GFV) in the car as a deposit for a new car.

PCH (personal contract hire)

PCH is similar to PCP with one notable difference, at the end of the contact period, you simply hand the keys back to the dealer, there is no option to purchase the vehicle as in effect you are simply renting it for the contract period.

HP (hire purchase)

A popular choice is hire purchase, under this agreement there is a deposit to pay and fixed monthly payments. The car officially belongs to the hire purchase company until the last payment has been made, when this has been done the car then belongs to you.

Logbook loans

This is completely different to the other choices as logbook loans can only be considered when you already own a vehicle with no outstanding finance. This is usually taken out by people whose credit record wont allow them a traditional loan, or need cash fast. As the risk to the lender is high, so are the interest rate repayments. Here is an online logbook loans company that allows you to view repayments via an online calculator.

With each of these loan choices we ask you to get professional advice or at least do your homework. Apart from your home, a car is likely to be your next biggest purchase.

– Shop around and negotiate where you can.
– Don’t just look at the rate and monthly repayments, look at the total amount repayable.
– Look at any additional fees, such as admin fees or early repayment fees.

Your Credit Score

Based on your financial history, a credit score is what companies will look at in order to help them in their decision on lending you money, wether you are ‘credit worthy’.

It is not just the big ticket items such as mortgages and loans, but also credit cards, new phone contracts and even insurance, all require companies to look into your credit score. It is therefore important for you to maintain a good credit rating through life.

Negative Points

1- County court judgements, bankruptcies.
2- Being late paying bills, credit cards.
3- Applying for too many loans, mortgages, credit at the same time.
4- Moving home a lot.

These above, are just some of the big red flags to credit scoring companies.

How to Improve Your Score

1- Pay your bills on time, set up direct debits.
2- Get on the electoral register, and keep your contact details consistent.
3- Until you have improved your financial situation and credit score, stop applying for further credit or loans.

There are 3 main credit agencies that supply your credit reference. By law you have the right to see your credit report. There may be a small fee to view your report.
Experian
Equifax
Callcredit

Mistakes

Sometimes agencies make mistakes, if you see a mistake on your report, contact the agency, by law they have 28 days to either correct the mistake or mark it as disputed which means lenders are not to rely on it when credit referencing.

It is important that you view your credit report and make sure it is accurate and up to date.