Don’t lose your home over debts on your credit card

As anyone with credit card debt will know, having high interest debts such as this can be very difficult to deal with, and can really eat into your income. The situation is not helped by the fact that many costs have rocketed of late, such as energy usage costs, food prices, borrowing costs and more.

The situation has been made worse for many borrowers because the interest rates, charges, and fees on many credit cards have been increasing even though the base interest rate has nearly halved compared to this time last year. This is something that has caused outrage, with event the Prime Minister, Gordon Brown, expressing his concern over the high cost of credit card borrowing compared to the base interest rates and telling credit card companies to stop fleecing customers at this financially challenging time.

However, all of this outrage and concern over credit card fees, charges, and interest rates does not help those that are already facing huge debts on their cards. Many people have had to rely on their credit cards over the past year, which for many has been extremely challenging financially, and this reliance has resulted in many spending far more than they normally would on their credit cards, and ending up with a huge debt that they are struggling to repay. Even though the Bank of England has knocked interest rates down considerably, this has done nothing to help many credit card customers, who have seen their borrowing costs continue to rise.

In the past, a viable option to cut credit card interest for those with decent credit was to transfer their existing high interest debts onto a 0% balance transfer card, which enabled them to enjoy a long period of interest free credit within which to repay the transferred balances, and potentially could save them a fortune in interest.

However, the global credit crunch has affected the credit card sector and other financial sectors, and the number of credit cards on the market that offer this facility has fallen over the past few months, leaving consumers with far less choice and making it far more difficult for many to actually get their hands on a 0% balance transfer card.

The worrying thing is that if you find yourself struggling with your credit card debt and are unable to meet your repayments, then it is not just your credit rating that could suffer. In fact, a loophole in the law could mean that even if you have an outstanding credit card debt of just £1000 one which have defaulted you could be forced to go as far as selling your home in order to get the debt paid off. This legal loophole is known as a charging order, and is what allows lenders to take such action in relation to unpaid credit card debt.

Of course, not everyone agrees that banks and lenders should be able to do this, and an official from the Liberal Democrat Party said: ‘No one should be allowed to lose their home simply because of a credit card debt.

More needs to be done by the government to ensure that lenders simply do not act overzealously, and only take possession of properties as a last resort. The fact that banks can now kick people out of their homes for not keeping up with their unsecured debts is very worrying.’

However, the fact is that at present this action can be taken, and therefore if you do have outstanding credit card debts that you cannot keep up with you need to make sure that you take action before the lender does. This means contacting the lender to see whether any arrangement can be reached with regards to repayments or even contacted a debt advisory service of the Citizen’s Advice Bureau for some advice and assistance.

Many agencies and professionals within the industry will be able to offer you advice on how you can try and alleviate the situation, and by seeking assistance early you could find that you are able to sort out a mutually agreeable solution with your lender before such drastic action such as charging orders is taken.

If you also have other debts, such as loans, store cards, catalogues, etc. you could consider consolidating these debts through the use of a debt consolidation loan. If you have good credit then you may be able to get an unsecured consolidation loan, but if your credit is not so good you will probably have to opt for a secured loan, which is secured against the equity in your home. However, bearing in mind that property prices have been falling you may find that you do not have adequate equity in your home to take out this sort of loan.