How do I know if I'm in trouble?

There is a world of difference between things being tight and being in trouble.  However a lot of the people I talk to don’t even know they’re in trouble.  Worse still they think they’re in pretty good financial shape.  All they need is a debt consolidation loan and life will be all good again. Unfortunately the reality of the situation is that debt consolidation isn’t an option.

I do simple test in the first 5 minutes of our conversation to get a gauge on the clients finances.  What are you earning – the pension = the maximum theoretical payment.  I say maximum theoretical payment because I don’t know many people who say they can comfortably live on the pension.  The pension is designed as a safety net it’s designed to just cover the bare necessities of life.  If the repayment for your debt consolidation loan is close to this, debt consolidation isn’t an option.  This is normally the bit where I get told “What do you mean I can’t afford a debt consolidation loan?”.  I”m sorry but it’s called unconscionable lending, you can’t put someone in a loan where they’re living on less than the pension.

The next step is to do a budget write down all your expenses (not including your debt); electricity, rent, groceries, insurance, Christmas presents, etc.  Subtract the total from your income.  What you’ve got left is your maximum repayment.  The important thing is that this is an average over THE WHOLE YEAR.  Ever get 5 bills at once? Me too. Turns out expenses aren’t evenly distributed across the whole year.   If your actual repayments are even close to your “maximum repayment” you’re in trouble, it’s unsustainable and the wheels will fall off. This is the main person I see who thinks there in ok financing shape.  They’re ok this month then next month their behind, then they catch up, then car breaks down and they’re permanently in trouble.

If they are in this situation I can renegotiate the debts with a debt agreement or a personal insolvency agreement.  I assess what is affordable based on your situation and make an offer to their creditors. Most of the time we can get it approved.  So there are solutions.