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What does debt do for you?

What does debt do for you?

02 Aug 2017 - The Banking Ombudsman Scheme is pleased to support Money Week 2017. This year Money Week runs from 14 - 20 August 2017 with the theme ‘what does debt do for you’?

“Lending and debt often feature in banking complaints”- says Nicola Sladden, Banking Ombudsman.

“Debt can allow new opportunities but it also can come at a great cost.” We have three tips for avoiding debt issues:

1) Have a plan.

Think about the long-term effects of borrowing money before you sign or swipe. For instance, while the price tag may look like a bargain, is it still cheaper once you pay interest? While your mortgage payments may be affordable now, what happens when you retire? If you are investing in a long-term project, what will you do if the project does not go to plan?

In one of our cases, a customer had purchased a business that was unsuccessful. He claimed the bank should have done due diligence on the business before lending him money to buy it. Unfortunately, we were unable to find in his favour as he was responsible for his business plan and completing his due diligence.

2) Think about what you will do if things go wrong.

Don’t just plan for the best case scenario. What would you do if interest rates increase, or if your car broke down? Could you still afford that new television on hire purchase?

In another case, a customer was highly paid and had bank lending. Unfortunately, she lost her job, and the customer complained that the bank had left her with too much lending. However, we were unable to agree given at the time the lending was entirely affordable.

3) Keep your head out of the sand if things go wrong.

If the going gets hard start talking about it early. For instance, we see people who ignore bills and hide hardship from their bank. But debt doesn’t go away by ignoring it. Most of the time the earlier you confront debt issues the more options you will have.

"Ignoring a bill will rarely make it go away. We often see cases where people get overwhelmed situation so don't do anything about them, which ends in debt collection and escalating demands," Sladden said.

"We get that sometimes things get too much, but instead we suggest you talk to the people you owe money to and negotiate a payment plan. The banks would rather talk to you early, while there is still time to put a plan in place."

For further information, we have nine quick guides on lending topics here.


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