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The term ‘financial literacy’ refers to taking the time to understand the world of finances a little more, and thinking about how you can save money through budgeting. There are a range of additional benefits that this can provide, including additional independence and being able to work towards your long-term goals. 

These are some of the benefits that come from improving your financial understanding and literacy, and why you should acknowledge your current savings habits to work towards a more secure future. Check this out for more details about financial advice and improving your credit, as well as more information on personal loans

Save For Retirement

So many people end up using their savings before they get the chance to retire, or reach retirement age. This can be due to a number of things, but one of the main reasons is poor financial planning and habits. Make sure that you investigate your current monthly expenses to see what you can cut back on. 

Ensure that you are putting away a small amount each month if possible so that you have a higher amount saved for your retirement. Getting on top of your financial situation and improving your financial literacy is essential for you to increase your retirement savings. 

Regardless of your age, you must have enough money in the right place that you can fall back on when needed. This includes medication, surgeries, and other things that will make your retirement a little more pricey. Ensure that you have prioritised saving for your retirement if you are closer to retirement age

Avoid Debt 

Another significant reason why you should improve your financial literacy is so that you can get a better understanding of your current income and allow for essential debt repayments. If you currently have a loan that needs to be repaid, or if you have a history of debt, then it could be worth changing your financial habits in order to avoid debt. 

Try to change your priorities and consider implementing a stricter budget so that you do not fall into similar habits that are potentially damaging to your account and credit rating. Creating better savings habits can allow you to repay your debt, or make space in your monthly budget for debt repayments. 

This can prevent additional damage caused by debt collectors, credit agencies, and a harmful impact on your credit score overall that will impact your financial future. 

More Confidence And Independence

Something that will come to anyone who works on the budget and financial literacy is an increased sense of independence and confidence. This is because you will be more aware of your current spending habits, and have the opportunity to reshape your budget and monthly outgoings. 

It could be worth taking a different approach to your finances so that you feel as if you have more control over your spending and have found the best deal with utilities and other regular bills. This can allow you to feel more confident and even treat yourself to something nice every so often. 

This can be an important part of somebody’s journey to financial literacy if you have a lower average income and find yourself regularly asking for help. Making sure that you know all the facts and how a range of things work within the financial world can allow you to be wiser with your money and save a small amount each month. 

Knowing that you can support yourself if you need it can make you feel more independent and assured that you do not need to rely on anybody else in an urgent situation. 

Financial Security

Part of the confidence that comes from improving your financial literacy stems from financial security. This can allow you to make bolder decisions and have a lot more clarity with your purchases in the future. Ensuring that you have a small amount of money saved over time can provide you with additional security. 

If you are interested in saving for a large purchase, have a baby on the way, or if you find yourself unemployed temporarily, a savings account or investment is a great thing to lean on when it is needed.

Avoid asking loved ones for money as this can have a toll on your relationship with them over time, so it is worth putting a little money away when you have it that you can fall back on when it is needed. 

Credit Improvement For The Future

Finally, it is worth making sure that you work on your finances so that you can improve your credit score. This is a three-digit number that banks and credit unions use to assess how likely you are to repay them over time. Whether you want a loan, or financing options for larger purchases including house mortgages, vehicle financing, or a vacation paid in instalments, your credit score can determine how flexible the corresponding institutions will be. 

Make sure that you are creating better habits for the future so that your credit score will be higher. This can allow you more flexibility with the amount borrowed, repayment periods, and even achieve lower interest rates. 

In some cases, this can be the difference between a smaller home and your dream location or building. Try to take better care of your finances now, so that you have additional security for the future. Higher credit scores can open all kinds of doors for you, so it is definitely worth maintaining it if possible. 

Summary

There are so many benefits that come from working on your finances and getting a better understanding of your financial literacy. Ensure that you figure out your main areas of weakness and that you are budgeting for regular bills and utilities that are necessary. Saving for the future can be done after this, but it could be worth seeking custom financial advice in more detail. Check out the link above for more information. 

This represents a record-breaking level of debt for HMRC to collect in a period of financial recovery, with the UK besieged by multiple macro and local economic challenges. Sushil Patel explores them over the next couple of pages.

Overdue Debt

Over the 13 years prior to the 2020-21 financial year, HMRC’s overdue debt averaged £18.1bn, peaking in 2008/09 following the financial crisis, where the debt level approached £26bn. As seen in the figure below, the current level of HMRC debt has increased by £38.5bn (203%) to £57.5bn.  Total overdue debt actually peaked at £72bn in August 2020, before falling to its year-end position of £57.5bn.

Overdue debt as a percentage of tax revenue, which since 2011/12 had stabilised at between 2% and 3%, has also risen to 9.4%.

debt, HMRC

There are several reasons for such alarming levels of HMRC debt and the primary reason being the support measures put in place throughout the COVID-19 pandemic, restrictions placed on HMRC’s ability to utilise its enforcement powers and HMRC changing their stance and overall approach on the collection of debt.

More than half of the £57.5bn overdue debt (£31.3bn) relates to VAT deferred through the coronavirus VAT Deferral Scheme/VAT New Payment Scheme. Here HMRC offered up to half a million businesses the option to defer VAT payments between 20 March 2020 and 30 June 2020 to the following tax year and gave the option to pay overdue VAT over smaller, interest-free instalments.

Revenue Losses

HMRC reported a decrease in revenue losses of £2.12bn from £4.08bn in 2019/20 to £1.96bn in 2020/21, this was due to the reduction in corporate insolvencies. Revenue losses occur when HMRC formally cease collection activity.

The reduction in insolvencies was partly caused by the government measures to financially support businesses during the COVID-19 pandemic and the introduction of temporary restrictions on the use of statutory demands and winding-up petitions.

For the period ended 31 March 2021, there were 9 cases (23 cases in 2019/20) where the loss exceeded £10 million, totalling £320 million (£634 million in 2019/20).

There were six write-offs (19 cases in 2019 to 2020) relating to Insolvency, totalling £126 million (£391 million in 2019 to 2020).

Although it is certain that large numbers of businesses would have failed had it not been for the introduction of government support measures, many of the measures have now ended, and HMRC will be facing pressure from the government to ensure the debts are collected.

TTP Debt Levels

Another reason for the debt levels increase is due to HMRC’s increased willingness to negotiate Time To Pay (TTP) arrangements with businesses. Due to the volume of cases, HMRC set up teams dedicated to dealing with specific types and amounts of HMRC arrears. The teams initially agreed deferrals of tax arrears on the condition that businesses either pay off the debt in full or contact HMRC in the future to negotiate a TTP (i.e.- an affordable repayment plan over an agreed period).

In the tax year 2020/21, HMRC negotiated approximately 864,000 (2019/20: 648,000) TTP arrangements, an increase of 33.3% from the tax year 2020/21. This increase has resulted in the quantum of debt under a TTP rising by 557% to £15.1 billion. The graph below highlights the significance of this increase when compared to the £2.78bn average debt level over the six years prior.

debt, HMRC

The coronavirus pandemic has presented HMRC with the extremely difficult task of assessing businesses future trading prospects in a period of unprecedented uncertainty. Key questions such as business viability and past compliance records will be at the forefront of HMRC’s collection process.

HMRC has been forced to take a much more open view on these questions, as many viable businesses have been plunged into extended periods of losses due to closures, national and regional lockdowns, along with sudden changes in consumer spending and habits.

Producing reliable forecasts has become much more difficult and something that management teams must revisit frequently. In many ways, HMRC’s greatest challenge is to find a somewhat unnatural equilibrium as a collector of taxes whilst simultaneously supporting UK businesses.

Ultimately HMRC will be responsible for deciding which options are best for the UK taxpayer in the orderly collection of overdue taxes while safeguarding employment and the ongoing recovery of the UK economy. The TTP scheme has been a resounding success since it was introduced in 2008/9, and it has facilitated the repayment of billions of pounds of overdue tax debts. What is clear is that the scheme is going to play a vital role in delivering the orderly repayment of overdue taxes over the next three years.

HMRC’s Future Outlook

The accumulation of unprecedented levels of overdue debt, debt tied up in TTP arrangements and the significant reduction in the numbers of insolvencies, puts HMRC in a difficult predicament. It is their responsibility to act in the UK Government’s best interests: to manage the levels of overdue debt whilst also ensuring enforcement action is taken against unviable businesses that are arguably trading to the detriment of UK taxpayers.

Some enforcement tactics against unviable businesses are therefore unavoidable, however, HMRC has shown throughout the pandemic that it is keen to support UK businesses. HMRC’s states in its latest accounts, that it has actively ‘reviewed and altered the tone of (their) communications, with different messaging determined by whether customers had experienced a high or low COVID-19 impact as well as offering ‘more flexible payment options such as longer TTP arrangements and extended review periods’.

Kroll expects this will continue to be the case and HMRC should be accommodating with businesses that submit strong proposals that warrant support and that include evidence of:

Whether you are just beginning to earn your own money and aren’t sure where to distribute it, or if you’ve been struggling with making the right decisions, this guide will help you to feel more confident with your financial decisions. Not only that, but you will feel braver and more optimistic about the future if you have savings to fall back on or even emergency funds for when you need it most. These are some basics of gaining control over your personal finances

Self-Restraint

This might seem like an obvious point, but you’d be surprised how hard it can be to exercise some self-control with money. So many people are impulsive and might find themselves splurging on random items that they don’t need when they’re overwhelmed or stressed. Some great ways to reinforce better money habits are to learn how to reward yourself for tough days without spending high amounts of money. The modern world is full of advertisements and fast-food restaurants that it’s no wonder that you might find yourself spending more money than you need to. A great place to start is to set yourself easy goals, like going a week when you only buy yourself one of two rewards. Then, you could focus on making those rewards more affordable, like making coffee at home instead of heading to Starbucks. 

Future Planning

Another great motivator to save towards is to assess your priorities and try to set up a savings plan. Whether you want to invest this or put it somewhere safe, you could speak with your bank supplier about what your options are. You might want to save for retirement or even a college education in the future. Spend some time thinking about what you want to save for, and let that encourage you to make smarter financial decisions. 

Emergency Fund

Another great way to start saving is to put a small amount away each month or payday and keep it as emergency savings. This can help with injury recovery costs, medication, or even car breakdown. Whatever your future might hold for you, it’s better to be prepared because money worries will only weigh you down during already stressful times otherwise. It is reassuring to know that in an accident or emergency, you have yourself and your family or assets covered. Another way to ensure emergency savings is to search for a great insurance provider. Natural disasters, severe weather patterns, and the loss of a loved one can be protected in one place. Worrying about money isn’t something that anyone should be doing while dealing with an emergency. 

Monthly Divisions

Spend some time assessing your monthly expenses and decide how essential each of them is. For example, you might be paying for a subscription that you no longer use. Of course, bills and utilities should be the priority, but once you spend some time mapping out your monthly costs, you might find yourself more motivated to save or even find more efficient ways to fuel your lifestyle. Rent, utilities, food, and insurance all add up, and you might even find that you could be saving money by moving to a more economic flat or house. 

Credit And Debt

One of the main reasons why so many people avoid working on their finances is because they might have outstanding debt or poor credit. This is why it’s even more important to work on your money management so that further debt is prevented. Working towards repaying loans or debts is also a great way to improve your credit rating. This means that banks are more likely to offer you more flexible repayment plans in the future for bigger purchases like mortgage schemes. It can be daunting when thinking about tackling your outstanding debts, which is why some personal loan companies offer services specifically for this. Seek friendly financial advice and tips on how you can consolidate your debts into one place and make it much more straightforward to eventually pay off. Rome wasn’t built in a day, so it’s important to remember that any small change contributes to a more financially stable, confident future. 

Online Banking

We live in a world where everything is readily available whenever we could possibly want it. That is why more and more people are opting for a banking option that is easy to access and has apps that are easy to use. Do your research to compare which banks offer the best app if this is something that is important to you. It can be an effective motivator when it comes to avoiding impulsive purchases because you will be able to check the app and see how your savings are doing and decide whether you can afford it this month. Checking your accounts on the go is a modern thing that makes banking and financial management more accessible and convenient than ever before. Not to mention, the quality of payment methods and security that are now within reach of banking apps. 

To summarise, this guide has hopefully provided you with some basic definitions to allow you to feel more comfortable thinking about personal finances. Finally getting round to managing your money and setting up savings can be intimidating, especially if you have a history of debt, poor credit, or even outstanding debt repayments. Loan companies are designed to help you and enable you to gain control over your finances for good. Hopefully, improving your knowledge of the world of money management will allow you to feel more confident and comfortable speaking with credit companies and banks about the future. Take some time to figure out what bank services are the most important to you, and think about whether you know where all of your monthly outgoings go to. Good luck! 

 

The changes include a “pay now” or “buy now” option which will allow Klarna users to pay for items in full right away. The introduction of this new feature follows criticism that the use of “buy now, pay later” services encourages people into debt. 

Klarna, like similar services, offers its users the opportunity to delay or spread the cost of a purchase without being charged interest or fees. This is especially appealing to young and low-income shoppers who may have a harder time meeting the repayment. Critics of the platform also say that people are bombarded with messages and adverts urging them to use the “pay now, pay later” service without there being a straightforward explanation of how the service works and what it involves.

Klarna says that its new feature, as well as other changes, will give customers greater control and clarity. The company also said that it would be performing more thorough checks on how much users can realistically afford to borrow and will begin to use clearer language during the checkout process to protect users. 

While it is a new introduction for the UK, Klarna’s “pay now” option already exists for customers in several other countries. 

If you've been paying student loans back for nearly a decade, you might be wondering if there's an easier way to get out of debt. Many students graduate expecting to hold their balances for decades, and there are parents today whose kids are going off to college while they're still repaying their own dues. Student loan debt may also be preventing you from reaching financial goals, but there are some ways you can take advantage of your age and experience. This guide is designed for 30-something professionals who are looking for easier ways to pay off their loans. If you are in this demographic, you might find that every tip isn't applicable to your situation, but you can still glean some inspiration from the advice.

Use Your Mortgage

If you are a homeowner, which we know is a long-standing dream for many, your mortgage might be even more valuable than you realize. One of the major perks of home ownership is access to additional funding when you need it. Taking out a home equity line of credit (HELOC) can help you pay off expenses, free up room in your personal budget and avoid borrowing more loans. Essentially, this line of credit increases the longer you own your house. The more you've paid off, the more funds you have access based on the value of your ownership percentage. You can read all about the steps to apply for an HELOC and weigh its pros and cons in a helpful online guide.

Refinance with a Private Lender

Student loan refinancing is one way to lower your monthly payments, although you will have to slightly extend the duration of your loan. There's a silver lining here, however. For those who are able to make their lower payments more easily, they may be able to pay off debt sooner. Refinancing can also be a way to create more flexibility in your budget, especially if you're trying to save up for other investments. When exploring private lenders, make sure you compare quotes and research each one extensively. Request estimates from at least three to four lenders before accepting any offer.

Snowball Your Other Debts

The snowball method of debt repayment shifts your focus from big bills to smaller ones. By paying off as many dues as you can in a short period, you free up more room in your budget. This allows you to pay off the bigger debts that are weighing you down faster. Another major reason to consider taking this approach to debt management is reduced interest. Many credit cards and small loans gather unnecessary interest because borrowers settle for paying the minimum. Although it may be convenient on a monthly basis, it could actually be costing you hundreds, if not thousands, in the long-run. For this strategy to work, you should first sit down and write out all of your outstanding debts. Organize them from the lowest amount to the highest. Make a plan to pay off at least one per month, or multiple if you can, so you can dedicate your extra expenses to repaying the bigger debts.

Depending on how much you owe, how high the interests are, what kind of loan it is, and your repayment history, your strategy for getting out of debt may change.

If you’ve fallen behind on payments, the situation may be more urgent. If interest rates are high, paying it off is more pressing to your financial health. When you develop a strategy for getting out of debt, it has to align with your unique financial situation.

Negotiating With Credit Card Companies

Let’s start with credit card debt, one of the most common financial challenges in North America. When you’re carrying a high credit card balance, interest rates hold you back. With interest rates able to reach the 30 percent mark and 20 percent APR being common, it’s a remarkably expensive way to borrow money.

One of the best ways to deal with credit card debt is reducing those charges, which you can do through credit debt counselling. A certified Credit Counsellor from a non-profit credit counselling agency works with you to create a plan to pay back what you owe. That plan includes negotiating with the credit card companies for lower interest rates.

Dealing With Debt Collectors

If you’re being contacted by debt collectors, the situation is urgent. Not only will you be getting calls at home and at work, but your credit rating has already taken a hit. If you’re dealing with debt collectors, try these tips:

What Happens When You Owe Taxes?

Government revenue agencies have many tools at their disposal to collect funds that they are owed. They can:

Even if you don’t file your taxes, if you owe them money, the revenue agency will retroactively apply penalties once they learn how much you owe them.

Ignoring the problem is not helpful. Your best strategy for dealing with tax debt is approaching the revenue agency and working out a repayment plan. A credit counsellor from a non-profit Credit Counselling agency can help you budget your payment plan.

Low-Interest Debt

Low-interest debt is often seen as part of everyday life. It usually comes in the form of a mortgage, an auto loan, or a line of credit or HELOC (Home Equity Line of Credit). Many see these as non-urgent loans, and if you can invest for a higher return than the interest charges, you may want to prioritise saving over paying them down.

However, the lifetime cost of interest on a mortgage is sizeable, and it’s not to be ignored. The true cost depends on how much you borrowed and the interest rate, but if you borrowed $500,000 at an average of 3 percent over 25 years, you would pay over $210,000 in interest rates alone.

Even low-interest loans are worth paying off as quickly as possible, if not at the expense of high-interest loans.

When you're applying for a mortgage, auto loan, personal loan, or any other loan, you want to get the best outcome. However, your loan application may not go well all the time. It's because lenders consider a range of factors to ensure that they are extending the loan responsibly.

If you don't know what your lender is looking for, it can be more difficult for you to get approval. It would be best to acquaint yourself with the different factors that may significantly affect a lender's decision on your loan.

Before handing in your loan application, you may read through the following factors to help you get the most favourable response from your lender.

What Do Lenders Consider?

Lenders look at different factors when making loan decisions. While some of them are lenient when loaning the money, others can be remarkably strict. It's also worth noting that every lender is different and may place a greater weight on different factors. Many lenders look for trustworthy borrowers to minimise the risks of lending money.

Nevertheless, below are the factors that lenders usually consider when deciding on your loan.

Knowing them by heart can make the difference in qualifying for a loan and getting it at a good interest rate.

How You Managed Your Credit

Typically, lenders will examine your credit report to know how you've managed your credit with other lenders in the past. Different relevant information that lenders are likely to see on your credit file, but your payment history will probably have a large bearing on your loan application.

Typically, lenders will examine your credit report to know how you've managed your credit with other lenders in the past.

If you didn't incur missed or late payments in your past credit accounts, they may consider you creditworthy. But your payment history, along with other details in your credit report, is basically encapsulated in a single number known as credit scores. Such scores may range between 350-850, and the higher they are, the better off your loan application will be.

How Much You're Earning and Currently Owing

It is important to remember that lenders prefer loaning money to borrowers who they have confidence will repay the loan as agreed. With that, they will certainly use your debt-to-income ratio (DTI) to determine how much you're earning and currently owing.

Although each lender has different requirements when it comes to your DTI ratio, they usually prefer a percentage that is not higher than 36%. If your monthly gross income is $5,000, your total monthly debts should not exceed $1,080. The lender's goal is to make sure you have enough income to make payments on new debt.

How Much You Want To Borrow and What It Is For

The amount you want to borrow and how you plan to use it can also affect a lender's decision on your loan application. Basically, it's one of the bases that lenders use to determine how much interest they will charge. If you borrow a larger amount, you are also likely to pay more interest on your loan. But a 20% down payment may help you get less interest.

Depending on the type of loan you'll borrow, lenders may also require you to put up collateral. But they usually do that when you're applying for a substantial amount. Lenders would want you to secure your loan so that they have a sort of protection if you miss payments. The loan purpose may also have some bearing on your application, depending on your lender.

The amount you want to borrow and how you plan to use it can also affect a lender's decision on your loan application.

How Long You Can Repay The Loan

The length of time you'll be paying the loan plays an important role in the lender's decision. Note that they will usually feel more comfortable lending you the loan for a shorter time. It's probably because you're less likely to default on the loan if you have to pay it sooner. But of course, it would mean a higher monthly payment on your part.

How Much Liquid Assets You Have

Lenders often take into account your liquid assets when you apply for loans like a mortgage, auto loan, or home equity loan. If they see that you have funds or assets that you can easily turn into cash, lenders may give you lower rates or better terms. It gives them reassurance that you have a financial cushion to fall back on quickly to make repayments even if you lose your job.

What Are Your Options?

Besides the factors mentioned above, it's worth noting that the type of lender you choose can also make a big difference on your loan application. If you want to increase your chances of approval, you may have to go to a lender that best suits your needs and qualifications.

It would help to get yourself acquainted with the following types of lenders and see where you most fit in.

Traditional Lenders

Traditional lenders typically refer to banks and credit unions. For such a long time, they were only the sources for loans and lines of credit. Among all the available commercial lending options, traditional lenders may offer the best terms. But the problem is, they are harder to qualify for since they have stricter application requirements.

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Alternative Lenders

On the other hand, alternative lenders have been around for only a decade. They are also known as online lenders, and they are not subjected to the same level of regulation as banks and credit unions. They often have more lenient qualifications and much faster turnaround times than traditional ones. However, these lenders may charge higher interest rates.

Conclusion

There are various financing options everywhere. However, they are not all created equal. If you want to get the best terms possible, you must take the time to shop around different lenders and work on what they're looking for.

Fortunately, there were only two asbestos bankruptcy cases filed with law firms in 2019. This is the lowest number in any given year since the special asbestos bankruptcy trust and channeling injunction stature was enacted through Section 524(g) of the Bankruptcy Code.

However, there were several mass tort lawsuit instances in 2019. Due to natural disasters and road construction issues around the world, mass torts have become necessary. These types of torts have also come about due to organized sexual abuse cases, the opioid crisis in the US, and the instances of ovarian cancer due to exposure to the asbestos-contaminated talc in Johnson & Johnson baby powder.

More About Mass Torts in 2019

2019 also marked an uptick in bankruptcy filings by non-asbestos debtors seeking to address potentially crushing liability caused by other types of mass torts, such as wildfires in California and a bridge collapse in Florida.

Debtors in non-asbestos mass tort cases now seek to emerge from bankruptcy cleansed of their current liabilities and protected from future claims by an injunction that “channels” such future tort claims to a trust established to resolve and pay claims, using procedures that are based on those in § 524(g).

For some mass tort cases, a trust was established to resolve these cases and pay mass tort claims. This is one of the main reasons that people who felt they might have a case if they were injured or harmed by using a product or resource filed a mass tort.

Fortunately, there were only two asbestos bankruptcy cases filed with law firms in 2019.

The trust ensures that every plaintiff involved in the case receives a small percentage of the settlement funds that are awarded when the attorney for the plaintiff(s) wins the case. In 2019, trusts were established for the asbestos mass tort cases filed against Duro Dyne National Corp, Oakfabco, and Maremont Corp, and for a sexual abuse mass tort against the Diocese of Duluth.

This year was also the year that Magnum Construction Management, LLC received a mass tort lawsuit when a pedestrian bridge collapsed in Florida.

What You Should Know About Mass Torts

A mass tort is essentially a civil action that a group of plaintiffs takes against one or a few defendants. The case can be tried in federal or state court. A tort is filed if a business' products or services caused significant injury to several individuals. That is why city government entities, medical facilities, and prescription drug companies are often the defendants in mass tort cases.

The Phases of a Mass Tort Case

Before you can determine if you officially have a mass tort case, an attorney will review several records and statements made by other plaintiffs in your case. The lawyer will also go over the allegations about the injuries sustained by you or other individuals involved in your case.

A mass tort lawyer will also have to assess several years' worth of your medical records. This means an attorney will review your entire medical history to determine if you have enough evidence to bring your case to court.

Lawyers who are presiding over a mass tort case will also have to check to ensure that allegations and verbal/written accounts are consistent among all the plaintiffs involved in the case. If each of the people looking for compensation has similar complaints about the defendant's products and services, the judge may be more likely to rule in favor of the plaintiff.

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If you are part of a mass tort lawsuit or think you may have one, be sure to consult with a qualified attorney to find out if you have a valid case and/or are entitled to compensation.

Debt doesn't have to be a fact of life, although many people look at it that way. They assume that it's normal to owe money and may not even pay attention to how much they are paying in interest or how long the payments will take them at their present rate, which could be decades. Others might be struggling to keep up with their bills and wonder if they will ever be in a better financial situation. Wherever you are on this continuum, it is possible to pay off debt fast using the steps below.

Overhaul Your Finances

Your first step is to take a serious look at your finances and figure out how much is coming in, how much is going out, and how much you owe. For now, just make a list of your total debts, excluding your mortgage since it may be more beneficial to pay this one off over time. Now, review your spending and look for places where you could cut back. Dig deeper than simply cutting back on your entertainment budget or buying cheaper groceries.

For example, could you be paying less for car insurance? What about moving to a cheaper apartment or getting roommates? If you have looked at ways to cut back and not found many, you might need to consider taking on another part-time job or looking for a higher-paying one. Another option is gig work, which can mean anything from dog walking to computer programming and more and is easy to fit around your regular schedule.

Look at Your Debt

The next step is to look at ways to reduce your debt in addition to paying it off. For example, interest on your credit cards is probably very high. Rather than continuing to pay off a little each month, a better option might be to take out a personal loan from a private lender. You can check your estimated interest rate, and it is likely it will be lower than the credit card rate. You can then use the loan to pay off the credit card in full and then turn to paying off the loan at a lower rate.

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Have a Plan

Next, you should decide whether you would prefer to pay off your smallest debts first or those with the highest interest rates first. The latter is the more financially sound approach because you will end up paying less in the long run. However, some people find that the former method is more motivating. The main idea is for you to stick to your plan, so choose the one that is the most appealing to you.

Make a list of the debts in the order that you will focus on them. Whichever one you begin with, put the majority of your money set aside for these payments toward that. On everything else, simply make the minimum payment. When that first one is paid off, add what you were paying on it to the minimum payment on the second item on the list. As you proceed through the list, the payments you make on the main debt will grow larger.

Annie Button offers her advice on debt management and how investment stacks up against simple repayment.

It is an interesting question that many people will have to face at some point in their lives: if you have some extra money, is it best to use it to invest in something that will hopefully give a profitable return, or pay off previous debts that you have accumulated?

As with virtually all matters of money, this is very much a question that can be answered only by looking at your personal circumstances. Your current budget and your plans for the future have a serious effect on the best moves to make with your money. 

Investing can provide you with a greater amount of money than when you started, which could conceivably make it easier to pay off debts in the future. But at the same time, large debts mean expensive interest payments, and these can actually hinder your ability to save extra money and continue investing. 

Here we take a look at your options when it comes to using extra money in the wisest way: should you invest, or should you pay off debts?

Not all debt is created equal

Debt is a real problem. In the UK, households have an average of over £60,000 in debt as of October 2020. And yet, this is an inevitable part of living. Without taking on debt, the majority of the country would not be able to buy a property or make major purchases such as cars. 

Sometimes, unforeseen events force individuals to take on debt - such as in the case of needing emergency repairs to a property. Credit card debt is also very common, with many preferring to make purchases and defer payment to later.

However, it is important not to lump all debt together. Some debts - such as mortgages or student loans - come at a relatively low rate of interest compared with others such as personal loans or credit cards. 

Without taking on debt, the majority of the country would not be able to buy a property or make major purchases such as cars. 

Pay off high-interest debt as a priority

Credit report providers Experian state that “prioritising the debt with the highest interest rate will save you more money and allow you to redirect funds to other financial goals faster”, and this is a good place to start. 

In general, it is always best to pay off any high-interest debt as soon as possible. This is simply because any investment that you might make needs to achieve a better return than the rate of interest that you are paying on your debt. This is clearly harder with high-interest debt. 

The value of investing

It can be very tempting to look at the extra money that you have available - whether it comes from savings, disposable income, or a financial windfall - and see the opportunity to turn it into more. 

This is especially true coming out of 2020, where many people have seen their financial situations change drastically. But is 2021 the right time to invest? 

Of course, everyone is facing uncertainty due to the COVID-19 pandemic and while this can be worrying it can actually make things interesting from an investment point of view. Typically the market responds poorly to uncertainty and challenges.

We are in a situation where the pandemic has caused shares in many previously profitable and successful businesses to fall dramatically. With vaccines now available, and a more positive outlook on the horizon, it may not be long before the stock market begins to stabilize. As such now could be an ideal time to invest. 

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Always get financial advice

No matter your financial situation, it is a great idea to take financial advice before making any move relating to investments or debt. As mentioned above, this really can come down to the specifics of your situation and a financial adviser can help with this. In fact, it can be advisable to look at specialists offering wealth management services.

“Wealth management is important,” says Jonathan Baggot of Numeric Accounting; “it is all about aiming to sustain and grow long-term wealth. The financial market is complex, so wealth management specialists have the knowledge needed to explain plans and schemes clearly and concisely while offering impartial and unbiased financial planning advice”

Final thoughts

Paying off debt is important - but making smart investments as early as possible is best if you wish to reach your financial goals. Everyone’s individual financial situation is different, so following the advice of professionals is a great way to make smart decisions. 

This is likely because of the common misconception that any form of debt is bad. While it's true that debts have negative effects, they are also good for several reasons.

Financially responsible consumers take out personal loans to purchase their dream home, finance their car or fund their education. Debts have positive outcomes if you know how to manage them responsibly. But it should be noted that debts, such as personal loans, are not for everyone. They can be a smart move, but only depending on your situation.

Nevertheless, knowing how you can benefit from a personal loan is an excellent place to start to decide if a loan is right for you. Here, we discuss the potential advantages of getting one.

Use It For Multiple Purposes

One of the notable benefits of personal loans is their flexibility. Unlike other types of loans, there are no restrictions on how you will utilise a personal loan. You can use the fund for almost anything. However, it's worth noting that not all purposes are financially healthy for you.

If you want to make use of personal loans to your advantage, here are some of the sensible options:

Emergency Expenses

It's always good to have a fund set aside for emergencies. But that is not always the case for everyone. Many people don't have the cash to cover unforeseen expenses like a sudden car repair or medical bill, based on a report. If you find yourself in the same predicament, you can use online installment loans from a direct lender to take care of financial emergencies immediately.

Unlike other types of loans, there are no restrictions on how you will utilise a personal loan.

Finance A Large Purchase

There are also instances when you have to fund a major purchase, such as buying a necessary household appliance or installing a new furnace. Paying for such a large purchase on a higher interest credit card can be too expensive. Taking out a personal loan can be your cheapest option without having to put up any collateral unless you have spare cash.

Consolidate Existing Debts

If you're having a hard time paying off existing debts with high-interest rates, you can consolidate them through a personal loan. With a low-interest personal loan, you can save money and reduce financial stress. Because instead of paying different loans with different due dates, you will only be paying one debt every month.

Save On Lower Interest Rates

Interest rates on personal loans are usually reasonable. In fact, their rates are typically much lower than credit card rates. If you have a good credit score, you can get as low as single digit interest rates on a personal loan.

Remember that the interest you pay on loan is the cost you pay for borrowing. Thus, the lower the interest rate is, the more money you can save. What's good about personal loans is you have various options to pick on since many lenders offer them. By shopping around different lenders, you can easily find the best rate for you.

Easy To Manage In Your Budget

Taking on debts can be stressful. You have to make adjustments in your budget to ensure that you can make monthly repayments on time. Else, you can incur penalties and more interest on your debts. But you can minimise this emotional toll with a personal loan because it has a fixed interest rate and predetermined term.

It means that you know exactly how much interest you'll pay and when you will be done paying off your debts. With a set rate and payment schedule, you can easily manage personal loans in your budget and stay in control of your finances.

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Boost Your Credit Score

Like any other loans, personal loans may be able to help you boost your credit score if you use them responsibly. Consolidating your debts in a single personal loan is the most obvious way it can help you improve your credit score. But then again, only if you make your payments on time and pay the full amount required.

Another thing is that replacing your credit card debt with a personal loan can also boost your credit score. Note that lenders may consider you a higher risk if your credit utilisation is too high. But since a personal loan is an installment loan, it is not factored in your credit utilisation ratio.

Avail Of Tax Benefits

There is no particular rule that allows you to deduct personal loans automatically on your tax bill. However, there are possible cases where you gain tax benefits under a personal loan. If you use the loan to invest in a business, you can claim the interest paid as an expense, which you can deduct from your taxable income.

You can also claim a tax credit if you take out a personal loan to purchase a home because the mortgage interest is deductible, provided that it is your primary residence. The same applies when you use the loan to fund a college education.

Wrapping Up

Personal loans come with certain benefits. However, it is always important to remember that it depends on how you utilise the loan. To ensure that you're making a sound decision. It would be best to consider your purpose in taking out the loan. Doing so can help you maximise the advantages of personal loans.

The Fair Debt Collection Practices Act protects consumers from unfair debt collection practices. This law applies to third-party debt collectors for personal debts. It doesn’t involve creditors who are legally attempting to recover debts owed to them.

The laws in your state may also protect you beyond this act. In addition to certain practices for collecting being annoying, many are also illegal. As a result, it’s helpful to know about these five unlawful debt collection practices and how to spot them.

Attempting to Collect Debts Not Owed

One of the biggest complaints consumers have is being asked to pay debts they do not owe. By law, if you don’t owe the debt in question, you have a legal right to request, in writing, that you want verification of the debt. You can also request that the debt collector cease all contact with you. Doing this in writing is wise as it ensures that you have proof that you made the request.

In many cases, when collectors try to claim a debt that you don’t owe, you may be a victim of identity theft. Always check your credit report to see if there are any mistakes or unusual activity.

Not Providing Written Notification of Debt

By law, a collector must provide you with written notice of the debt they are trying to collect from you within five days of the first contact. They must include the amount of that debt, the original creditor to whom the debt is owed, and a statement of your right to dispute the debt. If you do not receive this notification, you can file a complaint with the Federal Trade Commission. If you do receive written notice, it should include all the details of the debt.

Harassing Communication Methods

Collectors are prohibited from harassing you when they call or contact you by any other means. This is the law. At the same time, the FDCPA doesn’t specify a set number of calls debt collectors can make within any given time frame. Instead, the court can determine what is appropriate and what is considered harassment.

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You can take note of the days and times you receive calls and record messages as evidence. Collectors also cannot legally contact you before 8 AM or after 9 PM unless you’ve expressly allowed them to do so.

Threats of Legal Action

According to the law, debt collectors are not allowed to threaten legal action or wage garnishment even if you do owe a debt. Likewise, they aren’t allowed to threaten you with jail time or a poor credit rating unless they have the authority to do so. Such threats violate the FDCPA. Collectors must first sue in court and actually win their cases before they can take any legal action against you.

You can look up a list of debt collectors in the United States and read up on the actions they can legally take.

Making False Statements or Representations

Debt collectors are prohibited from using false statements or representations to force you into cooperating with them. This rule holds true even if you owe a debt. If they claim an affiliation with a government or state, tell you that you will face prison time, lose property, or have your wages garnished, or even imply that you committed a crime, it violates the FDCPA.

If you have been harassed by debt collectors who are violating the law, you need the assistance of a skilled attorney.

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