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Debt: Your questions answered
By Catherine Burns
Newsbeat reporter

Credit cards
Three Newsbeat listeners get advice about cutting their debt

Debt is a major headache at the best of times but this year there are some seriously gloomy financial predictions around. The average household in the UK owes around 9,000, not including mortgages.

So we've challenged some Newsbeat listeners to try to sort out their money problems.

We took them to meet a debt counsellor, Chris Tapp, from the charity Creditaction.

And we're going to keep tabs on them all year as they try to get into the black.

Out of control debts

The problem


Andy owes 28,000, and it's getting him down.

His problems started when he was made redundant.

But he also racked up 10,000 of loans paying for a wedding, before splitting up with his fiancee.

Now he's got to the stage where he's struggling to pay everything he needs to every month.

In the long run, he wants to clear his debts and buy a house.

The advice from Chris


First of all, Andy needs to do is check he's not paying too much for his credit cards and swap to interest-free deals.

But if he only does one thing, he should get a debt management plan.

This is where you make one single payment every month and then it's shared out between everyone you owe.

Some companies charge for this, but there's no need to pay because several charities do it for free.

The three biggest names are:

Mortgage Worries

The problem


Lauren
Money experts say Lauren and partner Chris shouldn't panic
Chris and Lauren have bought their first house together and are worried about what's going to happen when their fixed-rate mortgage runs out later this year.

At the minute, they don't have a huge amount of spare cash.

They're expecting their energy bills and council tax to go up and think if their mortgage gets more expensive too, they might have to sell up.

It doesn't help that they were badly affected in last summer's floods.

They're worried this could mean they'd struggle to find a buyer.

The advice from Chris


More than a million people are going to come off their fixed-rate mortgages this year and they could find that higher interest rates, and so, higher payments.

But, Chris and Lauren shouldn't panic.

Their mortgage doesn't change until December and things could be looking a lot rosier by then.

For now, the best thing they can do is concentrate on paying back any debts and try to put some extra cash aside.

So, if they do get any nasty financial surprises, at least they'll be prepared.

Can't get any credit

The problem


Paul is a chef and he's moved around a lot with his job.

He's had 16 addresses in eight years.

And now, no-one will give him any credit.

He can't even get a normal debit card or have broadband fitted at home.

He's in debt too but is on top of it.

He owes about 17,000 and is working two jobs to try to get it paid off as quickly as possible.

He wants to buy a house in the next year or so but can't see anyone giving him a mortgage.

The advice from Chris


Paul's timing isn't great.

At the minute, we're in the middle of a "credit crunch" which basically means there's not as much cash floating round money markets, and so, lenders are being doubly careful about who they'll give credit to.

In the meantime, Paul needs to try to clear up his credit rating.

That's what companies look at when they're deciding whether to lend you money or not.

Moving around so much could make him look slightly dodgy, so he needs to explain that it's for work.

The good news is, if he keeps paying his debts back, that's going to make his credit rating look stronger too.

And by this time next year, he'll be a much more attractive prospect to lenders.

SEE ALSO
Q&A: How to manage debt
Wednesday, 3 January 2007, 14:46 GMT |  Business
How much money should you borrow?
Friday, 27 April 2007, 12:12 GMT |  Business
Financial Contacts - Borrowing and Debt
Wednesday, 24 September 2003, 15:05 GMT |  Business

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