Author: Matt

Turned Down For A Budgeting Loan – What Next?

A budgeting loan is designed to assist those that are on a low income to meet extraordinary costs that do not crop up often, are essential to everyday life, and would be difficult to pay especially for those on benefits. There are certain criteria that you must meet in order to be accepted for such a loan and, following application, you will receive a decision by letter from the DWP.

Looking through forums and advice sites, one of the most common reasons for being rejected a budgeting loan is the fact that the applicant does not meet the full requirements. Specifically, your application will be rejected if you have not been in receipt of the appropriate benefits for a minimum of 26 continuous weeks. Read the full list of budgeting loan eligibility criteria.

When you receive a response from the DWP you will either receive one or more offers for the loan or you will receive a rejection letter. You do have the right to ask for the decision to be reviewed but if you fail to meet any of the eligibility criteria, including being in receipt of the right benefits, your review will give the same outcome.

You have the right to request a review within 28 days and by writing to the Jobcentre Plus. You should explain why you believe the decision was an incorrect one and if this review still comes up unsatisfactory then you can request a further review by the Social Fund Inspector. The Inspectors are independent from the DWP and you can download the appropriate form from their website here:

http://www.irs-review.org.uk/infocent/leafbook/irs1/irs1.pdf

If you are turned down for a budgeting loan then you may need to consider other options. Steer clear of high interest debts like payday loans because they can and often do lead to further financial trouble. An IVA, or Individual Voluntary Agreement, may be a good way of reducing your monthly expenditure because it could lead to a reduction in your monthly outgoings but there are ramifications to an IVA because they remain on your credit file for 6 years from the date of acceptance. You can find out more information on IVA applications on the BudgetingLoan.co.uk site.

How Many Of My Creditors Must Agree To An IVA?

Typically, a debtor must have a minimum of £10,000 of debt with at least two creditors in order to be considered a suitable fit for an IVA. An Insolvency Practitioner will then attempt to come to an agreement with those creditors to accept regular repayments totalling a reduced amount of the debt. Certain criteria must be met for the IVA to be considered legal and effective; not all of your credits need to agree to the IVA schedule for it to go ahead, however.

Creditors that are owed 75% or more of your debt must agree to the proposal. If you owe 5 creditors £3,000 each then if four of the five creditors agree, your IVA will be accepted and you will enter into agreement to pay the agreed amount.

If you only have two creditors for roughly the same amounts of money then your Insolvency Practitioner will have to ensure that both of them agree to the repayments. Your Practitioner will work with you to determine who and how much money you owe and they will attempt to draw up a repayment agreement with each to ensure the greatest chance of approval. If a proposal is rejected then your Insolvency Practitioner will usually work with creditors individually to ensure that an agreement is reached eventually.

Can I Have A 2nd House With An IVA?

An IVA is a formal agreement meant to reduce the levels of debt a debtor has. It is considered a final step and alternative to bankruptcy and an Insolvency Practitioner will work with you to ensure that it is the best option. A second house is likely to be seen as a means of raising capital to pay off your debt and you may be expected to realise the capital in your assets in order to repay debts. As such, it is unlikely that you will be allowed to keep a second home when entering into an Individual Voluntary Arrangement.

In such circumstances you should speak to a professional Insolvency Practitioner or other personal finance expert. They will discuss your insolvency options with you and help determine what your best options are.

In an IVA, your Insolvency Practitioner will attempt to come to a formal agreement with creditors. A majority of creditors must agree to the terms of the agreement and if they are aware of the existence of a second home or income from a second home then they may demand that the property be sold in order to meet your financial requirements and pay off the debt that you have accumulated.

How Soon After My IVA Can I Get A Mortgage?

An IVA will remain on your credit file for a total of six years from the date that you first come to the arrangement. If your IVA, therefore, lasts for five years before you have repaid all the debt then you will still have to wait for another year before it comes off your credit record. What’s more, you are likely to have to rebuild your credit rating before you will be accepted for a mortgage.

An Individual Voluntary Agreement is reported to the credit bureaus as soon as it is agreed. It will remain there for a total of 6 years. Most IVAs last for a period of 5 years which means that your IVA will be visible on your credit report for at least one more year after you have finished making your repayments.

Mortgage lenders, and other lenders, are more reluctant to lend money now than ever before. Even sub-prime lenders will usually require that you can show good credit rating. This means that there is evidence of having taken out debt and kept up repayments. Once you have finished paying off your IVA you will need to start rebuilding your credit rating before you are likely to be accepted for any kind of credit.

It is likely to be at least six years from the date of the start of your IVA before you can take out a mortgage.

What Is An IVA?

An IVA or Individual Voluntary Arrangement is a repayment plan that helps debtors with large amounts of debt to repay a reduced amount of what they owe. It is a legally binding agreement between you and those that you owe money too. Some debts, including your mortgage, cannot be included in the agreement and you will be expected to repay this amount in full. The amount of money that you owe under an IVA will usually be reduced by up to 75% following agreement with your creditors.

An IVA is meant as an alternative to bankruptcy and while it can help greatly reduce debt levels, there are pitfalls and negative aspects to an IVA. The IVA will usually stay on your credit record for a period of 6 years and you will find it more difficult to obtain credit during this period. However, if you are in such a position where an IVA is your best option then you are unlikely to be able to successfully apply for credit during this kind of time period anyway.

The IVA is a formal agreement so a failure to meet an agreed repayment means the IVA could fail. It is also unlikely that you will be able to make small changes if you are struggling to live within the terms of your IVA, although a major change such as a change in employment means that you may be able to amend the terms of your agreement.

In order to be eligible for an IVA you typically need to have a minimum of £10,000 unsecured debt. Usually, this debt will be with a number of creditors although agreement may be reached with a single creditor to reduce debt, if it is in the best interest of the company concerned. A minimum repayment of £100 per month is normally required; however, the more money you owe, the more you will usually be required to pay.

You will need to use an Insolvency Practitioner who will aim to make arrangement with you and your creditors in a bid to make payments against your debt. They will look at your personal circumstances, determine how much you can afford to pay after necessary household expenses, and how much creditors are willing to accept. Using an Insolvency Practitioner will improve your chances of having creditors come to an agreement over the money that you need to repay.

An IV, or Individual Voluntary Agreement is meant as an alternative to bankruptcy that will help a debtor clear debts of £10,000 or more, typically over a period of 5 years. It is a formal agreement and it is necessary to stick to the agreement once made. It can help you become debt free and meet agreed regular repayments once the terms have been agreed.

Payday Loan Usage May Prevent You From Getting A Mortgage

There are many reasons why people are discouraged from applying for payday loans, not least the four figure interest rates that they tend to attract, and sub-prime mortgage lender GE Money has added further fuel to the fire by declaring that they refuse mortgage applications from those that have taken out a payday loan in the past three months.

People on a low income can find it difficult to get credit and, in a lot of cases, this has led them to apply for payday loans. Unfortunately, such an emergency loan can attract exceptionally high interest rates and a failure to make repayments often leads to even greater repayment demands. This has led some borrowers to taking out multiple loans in a bid to try and recover from the situation. Many groups and lobbies advise against the use of these loans and for seemingly good reasons.

Another reason that has presented itself is the news that at least one mortgage lender considers the use of payday loans to be a negative sign.

GE Money, a mortgage lender that specialises in the sub-prime market, has said that they will refuse an application from anybody that has taken out a payday loan in the past three months.

This not only includes people that have struggled or failed to make repayments on the loans but even those that met the repayment schedule and didn’t struggle to pay back the loan.

Nationwide have also said that payday loans may have been a factor in calculating whether a person was a credit risk or not, but went on to say that they would not turn down an application based solely on the fact that a person has applied for a payday loan. According to MortgageRates.org.uk, HSBC have said that they do not differentiate what type of debt a person has. The site also points out that some lenders may be using payday loans as a sign that an individual is not a creditworthy borrower.

Fortunately, there are alternatives to using payday loans. A budgeting loan is a tax free loan made available by the government via Jobcentre Plus. Those on certain benefits are able to borrow up to £1,500 for any of a variety of reasons and the repayments, which are taken directly out of benefit payments, are made over a period of up to 2 years. If eligible, these Social Fund loans can prove essential help when borrowers need it most.

Read more about budgeting loan eligibility.

Bankruptcy Reaches Lowest Rates Since 2003

The number of people that are declaring themselves bankrupt has reached its lowest rate since 2003 but the number of people taking out recently introduced DEOs has risen.

Bankruptcy should be considered a final option and should only be followed once all other options have been thoroughly explored. While it will clear the majority of debts a person holds, it will remain on your credit file for as long as seven years and it will be very difficult to find any form of credit that you will be accepted for during this period. It can even become difficult to get a bank account or a mobile phone contract.

27,390 personal insolvencies were registered in the second quarter of 2012 which represents a drop of 10.2% on the same period a year ago. However, there has been an increase of 10% on the number of people that have taken out a DRO; the cheaper alternative to bankruptcy which is aimed at those with debts of less than £15,000 and be on a low income.

A Debt Relief Order is cheaper than bankruptcy, which costs £700.

Another alternative to bankruptcy is an IVA. In an IVA, debtors reach agreement to pay a reduced amount of their debts to creditors. This type of arrangement has become more popular and the number of people taking out this alternative product has also dropped by 7%. Despite this drop there are still more people that have taken out an IVA than have declared bankruptcy.

 

 

Most Expensive Social Housing Should Be Sold To Raise Cash

A government think tank has suggested that the most expensive social housing in the most expensive regions should be sold off in order to make money that can be used to build more housing in under-privileged areas.

Alarmingly, research showed that approximately 1 in 5 social housing properties have a value more than the average house price in that area. This is equivalent to more than 800,000 properties, and a think tank has said that selling these homes would raise a staggering £4.5bn. The report suggested that the money raised should go straight back into building property and that it would be enough to build 170,000 social homes a year.

Approximately 3.5% of these expensive social houses become vacant every single year and the report says that this is the ideal time to sell it off in order to raise additional cash; money which can then be used to pay for additional, cheaper housing.

The ideas have met with scrutiny and praise in equal measure. Housing Minister Grant Shapps has described the plan as blindingly obvious.

Other findings in the report state that spending guidelines should be introduced that will help ensure stock-quality standards are driven higher. Shapps went on to say that it makes sense to use social housing stock as efficiently as possible and that it was merely leftwing dogma that was preventing this new plan from already being implemented.

UK Unemployment Rate Down But Eurozone Figures Hit New High

The Eurozone crisis does not look set to abate any time soon as new figures show that unemployment reached a new all time high of 17.56m. The figures do not look good for individuals or businesses and indicate that companies are preparing for the worst as they look for additional ways to cut their budgets. However, the picture in the UK is not quite as gloomy as it showed a drop in unemployment, down to 2.61m in the three months ending April.

With massive unemployment rates in countries like Spain, where approximately one quarter of all people are now unemployed, it is perhaps little surprise that the Eurozone is faring so badly. In total, 11.1% of people in Eurozone countries are now without work which signifies the lowest rate since records began back in 1995 and shows that the region is far from out of the crisis that has been threatening many countries.

The UK has performed a little better although a UK unemployment rate of 8.2% still indicates a large portion of the workforce currently out of work. What’s more, the number of people claiming Jobseeker’s Allowance has risen by 8,100 people and 1.6 million people claimed the benefit in May 2012.

Poor unemployment inevitably leads to a greater number of individuals and families that fall within the low income threshold. Such families will find it more difficult to meet regular payments and the government backed Social Fund scheme is designed to help such individuals and their families.

The Social Fund offers interest free crisis loans and budgeting loans that can be used to pay for things like household bills, new clothes, and other emergencies that would not otherwise be available. There are some criteria that need to be met for each of these types of loan but they provide a viable means of paying for essential items, for those families that are at highest risk. As unemployment remains at high levels, the number of people relying on budgeting loans and other Social Fund loans is likely to continue increasing.

Crisis Loan Vs Budgeting Loan

Both budgeting loans and crisis loans are emergency loans provided by the Social Fund and meant to help out in times of financial difficulties. Both are interest free loans and both are available to individuals and families that are on a low income. However, whereas the budgeting loan does require that you have been receiving specific benefits for a period of 26 weeks or more, this is not the case with a crisis loan.

Amount You Can Borrow

A budget loan offers up to £1,500, assuming that you do not owe any other money to the Social Fund. A number of factors will be considered when considering your application but this is the maximum amount you can borrow. With a crisis loan, however, there is effectively no upper limit. If accepted, you will be able to borrow the amount that you need to borrow to help you through the difficulties you are facing.

Eligibility

A budgeting loan requires that you have been receiving, for a period of 26 weeks or more, Income Support, Jobseeker’s Allowance, Employment and Support Allowance, or Pension Credit. However, there are no such criteria for borrowing money with a crisis loan. You do need to be aged 16 or over, though, and you need to be able to show that you are indeed suffering from some form of crisis.

Crisis Conditions

There are a number of things that may be considered a crisis for the purpose of borrowing money from the Social Fund. Floods, fire, or burglary are among some of the possible cases. If you are due to start receiving benefits and do not have enough money to cover expenses or other bills then this too may be considered a reasonable reason for application.

Expenses Covered

A budgeting loan can be used for expenses like new clothing or repairs to the home. If you are awarded a crisis loan then this can also be used to cover living expenses, rent in advance, travel expenses if stranded away from home, and repaying emergency credit on a power meter as well as other expenses.

Terms

You will be expected to pay either form of loan back although both are interest free. If you are receiving benefits, your repayments will be taken directly out of these according to the terms agreed when you accept the loan. You will have up to a maximum of 104 weeks to repay either form of Social Fund loan and, because you do not need to be receiving benefits to receive a crisis loan, these can also be repaid by cash, postal order, or cheque on a weekly basis.

Social Fund Loans

The Social Fund offers a number of different forms of credit and grant to help those on low incomes to be able to pay for their daily living expenses. You should choose which applies to you most accurately and then make your application for this, ensuring that you show your eligibility to help improve the likelihood of your loan application being accepted.