There are 14.3 million low earning households in Britain. That is, households that are living on an earned income of less than £20,350 but independent of state support. This is a difficult situation to be in as you are earning enough that you do not qualify for government support but you are extremely vulnerable to effects of the credit crunch. Essentially, you are in an extremely precarious position, potentially on the verge of struggling financially and facing the worst rate of unemployment in 15 years; two and a half million unemployed in the UK.
A recent study has suggested that about a quarter of low-income households are currently spending more than a quarter of their monthly income on servicing their debts. That figure has doubled in three years. Almost a third of these low-income households have a high loan-to-value mortgage and are presently in negative equity, which makes them vulnerable to repossession and homelessness if they lose their job and are unable to meet mortgage repayments. Homeowners run a severe risk of repossession of their assets, including their home, should they be declared insolvent. This is one of the key benefits of an Individual Voluntary Arrangement, or IVA. If you enter in into the agreement and stick to the payment schedule, your home is perfectly safe. At the very most, you may have to give over some of the equity in your home to service your outstanding debt.
Do bear in mind that the Council of Mortgage Lenders’ projected number of repossessions for the year has continually dropped, so the pressure on homeowners would appear to be easing too. We have also seen the recent expansion of the Income Support for Mortgage Interest scheme. This is a government initiative that simply means that homeowners have less waiting time between losing their jobs and receiving financial aid in servicing the interest on their mortgage payments. The wait has been cut from 39 weeks to 13 weeks and there is no doubt that it is a valuable asset to homeowners facing debt problems. As is the Homeowner Mortgage Support Scheme, which allows households that suffer an unexpected drop in income to defer a portion of their mortgage payment for a period of up to two years.
Your first step when considering any personal debt solution, whether it’s unsecured debt like credit card arrears or your secured mortgage payments, should be to get professional financial assistance and debt advice. After all, everyone’s financial circumstances are different and there is no quick fix for your debt problems. So, don’t hesitate in getting debt help. Take the 15 second debt wizard at Harrington Brooks for a free, personalised debt solution.