Around a massive 146,000 people will become insolvent this year in England and Wales, up by 10% on 2009. Worse still, nearly half of all people struggling with debt have not sought advice because they do not feel their problem is big enough to seek help for. There are around 1 million people in the UK are struggling with debt, with some 400,000 yet to come in from the cold and seek advice.

Young people in particular seem to be heading for debt problems, with a third of those aged between 18 and 24 who have debt problems having not asked a professional debt adviser or even their parents for help, saying instead it is “easier not to think about it”.

Exploding the myths

Common reasons for not seeking help are that people are afraid of the stigma of seeking help for their debts or are worried about what people think or about the impact it will have on their families.

If your debts are keeping you up at night, then doing nothing is the quickest way to make your situation worse. Debt counselling businesses are a well established and legitimate way of tackling debts. Typically your creditors will be contacted on your behalf and asked to freeze interest payments, arrange a repayment plan, and get some of your debts written off if you are eligible for this. This negotiation is on your behalf and should happen discreetly and quickly. Working with a reputable firm who will treat your problems sensitively, fairly and efficiently is paramount.  Below is a summary of the routes that may be suggested to help tackle the different sorts of debt problems.

What help can you expect?

Debt Relief Order

These last for 12 months, and within that time any creditor named on the order is not allowed to chase you for money. To qualify, you have to owe less than £15,000, not own your own home, and have very little in the way of surplus income or assets.

These are run by the Insolvency Service, so you do not have to go to court, and they cost £90.

Once you get through the year and the agreed payments, you will be free from those debts, subject to the terms of the order.

Debt management plan

Debt counsellors can agree a set monthly payment with all your creditors that will clear your debts within an agreed period of time. The benefit is that you pay one amount to your debt counsellor, and that is then split between your creditors – no more juggling amounts to different lenders.

Some creditors may agree to write off some of your debt, some may freeze interest, and the best bit is that all the difficult conversations are taken on by a professional on your behalf.

Individual Voluntary Arrangement
This is where things start to get more formal. An IVA is a binding agreement on all parties that you will be clear of your debts within five years, providing you keep your payments going. Up to 75% of your creditors for your unsecured debt have to agree to this, so it is not a foregone conclusion.

There is no minimum debt you have to owe to have an IVA, but generally less than £15,000 would be dealt with where possible through a debt management plan.

Bankruptcy

If you have no alternative, then bankruptcy may be your last resort to protect yourself from creditors. It sounds scary, but may not be as bad as you think. Don’t think that means it is an easy option though, it isn’t.

You can be made bankrupt by a creditor for owing as little as £750, and it will have a severe impact on your ability to get any kind of credit for up to six years, even though the bankruptcy itself can be discharged within one.

You can only have a bare minimum amount of money to live on, you will be forced to sell assets to pay your creditors, and your home is definitely at risk if you take the bankruptcy option. Speak to a debt counsellor before you make any rash decisions.

Save up to £6,240

Anyone languishing on the Chesham Building Society’s 6.45% standard variable rate with a £150,000 interest only mortgage, is paying £9,675 a year in interest. But the HSBC two-year discounted variable rate of 2.29% would cost the same borrower £3,435 a year in interest – a massive £6,240 a year less – or £520 a month.

We think it’s important that you speak to a mortgage broker rather than simply applying direct for one product with an attractive headline rate. They’ll be able to compare multiple deals in the most accurate way meaning that you can be much more confident that you’re getting the best deal and that you’ve seen the pros and cons of everything on offer.

Save More Than £3,000 on Buy to Let Rates.

Buy-to-let landlords coming to the end of their deals are able to choose from the widest range of mortgages since September last year. But deciding whether to choose another deal, or simply go onto the lender’s standard variable rate, is a question best answered by your broker.

Buy-to-let mortgages almost disappeared last year. The number of mortgages available to buy-to-let landlords dropped by 95% in September, compared to the peak of the market in August 2007 when 3,662 mortgages were available, according to data from Moneyfacts.

In September, just 179 BTL mortgages were on offer, and now the number has risen to 304.

Should you get another deal now?

At the moment, Coventry Building Society is offering 3.99% discounted variable rate for two years, and you would need to borrow no more than 60% of the property’s value. It has a booking fee of £250 and an arrangement fee of £800.

Its fixed rate BTL is a best buy at 4.59% for two years, with the same arrangement and booking fee.

However, some lenders still have standard variable rates as low as 2.5% – including Lloyds TSB, Cheltenham & Gloucester, First Direct, and HSBC. If you are prepared to take a risk on rates rising, then the best thing you can do if you are coming to the end of a deal with one of these lenders is nothing at all.

On a £150,000 interest only mortgage, comparing the 3.99% variable with the 2.5% SVR for these lenders, you would save you £2,235 over a year.

A broker can help you explore your financial position so you can decide whether you can afford to take the risk, or whether you need to fix your costs for a set period of time. The difference in cost can be significant.

What’s the catch?
Well, nothing really. You need to use it’s ‘Premier Switching Service’ which moves across of your existing direct debits and standing orders. You also need to pay in at least £500 from a non-Alliance & Leicester account within 11 weeks. But other than that, if you switch today, you should receive the £100 bonus within 3 months.

Cons? The offer is not available to anyone currently holding or who has held an A&L, Abbey or Cahoot account in the last 3 months, or anyone who has no direct debits to switch.

Because this offer is so competitive, it’s likely to close soon as demand is likely to be very high and A&L will withdraw it once they have created a certain number of new accounts.

Aviva’s Healthier Solutions product is offering you the option to cut your premiums in two ways. You can reduce the amount you can claim on your out-patient cover to a maximum of either £500 or £1,000 a year for each person. The former would cut your premiums by a third, the latter by a sixth.

Thing is, if you need to claim for specialist consultations, physiotherapy, diagnostic tests, osteopathy, a chiropractor or psychiatric treatment as an out-patient, no more than the limit will be covered.

Do you really need the cover?

Be realistic, do you think you are going to need to claim more than that much for any one or a combination of treatments?  The Government has promised a legal right to treatment on the NHS within 18 weeks, so why not use your policy to claim for diagnostic tests in this first 18 weeks, then fall back on the NHS if necessary. So this could be a neat way to plug the gap. On that basis, we give this change a thumbs up.

If you are prepared to take the risk that you will not need more diagnostic assistance than this in a single year, then this is a great way to reduce your premiums.

Raise your excess

Want to save some more? Then you can also take a higher excess. Most companies will give you a discount if you are prepared to take the hit with the first chunk of the claim, so speak to your broker if you are prepared to stump up the cash for the initial part of any claim.

The savings on offer are serious. For example, Aviva will cut your premiums by 65 per cent if you pay the first £5,000 of any claim. The drawback is you are unlikely to be able to claim for most of the medical needs you might have, short of a more serious operation. So you would need a spare £5,000 to cover the first part of any claim in your bank account, unless you are prepared to take a chance on the NHS. For many, this would be a step too far.

But if you want to cover less of the costs yourself, you can halve your Aviva premiums with a £3,000 excess. Other options range from a 5 per cent reduction for a £100 excess, to 35 per cent for a £1,000 excess. Speak to your broker to find out what other companies will cut your premiums by.

Get healthy

A healthier lifestyle will lead to lower premiums for some companies too. PruHealth gives discounts up to 25 per cent on your premiums for this. Like car insurance, you get a no claims bonus too, which takes the premium down by as much as 35 per cent. But that discount is cut if you make a claim. Aviva offers a 15 per cent discount on premiums for healthy living, and you can protect your no claims discount if you want to.

These types of menu plans have been around for a while now – 14 years to be exact. Scottish Provident launched the first plan like this, and most other providers have now followed suit. It means you can effectively tailor a plan to your needs without paying over the odds.

Also, as your lifestyle changes, you can plug in or take out elements of cover that you no longer need. This way, you will always have the best cover at the lowest price.

Speak to a broker

Protection is not an easy area to get the right deal, so use an adviser to help you get the best deal. Cheap is not necessarily best, but don’t pay more than you need to for the cover. The mix and match menu options mean unless you really know what you are doing, you are unlikely to get the best deal. After all, you need to be comparing like-with-like, and that is not simple with health policies. So use an adviser.

Better still, ask the adviser if he will give you a further discount – many will be prepared to give up some commission to get your business, which will make your policy even cheaper.

Market leading rates

The current market leading card is from Virgin Money, and offers 0 per cent on balance transfers for 16 months – although you would pay a 2.98 per cent fee for the privilege of moving your debt – and you can also get 0 per cent on this card for new purchases for three months.  Remember you are trying to reduce your debts, so don’t spend any money on this card or you’ll start paying interest on the purchases until you have paid off your full balance.

Barclaycard Platinum is offering the same deal, but the 0 per cent on balance transfers lasts until January 2011, and you pay a slightly lower transfer fee of 2.5 per cent of the balance. You can see even more deals from us online.

Move store card debt

If you get a 0 per cent card, move any other expensive Christmas debt you have built up across to it too. Store cards are among the most expensive ways to borrow. Not clearing the balance each month is one of the biggest financial mistakes you can make, as most have interest rates of more than 20 per cent or more. Get them over to the 0 per cent rate now, so you can freeze the interest long enough to get back in control.

Pay off as much as you can

Maximise what you can pay off within the 0 per cent period. It’ll probably be one of the few times in your life that you’ll be borrowing money for free, so make the most of it by throwing everything you’ve got at reducing your debt. It may even be worth considering using savings, if you have them as the debt will almost certainly cost you more in interest than you’ll get paid on your savings.

If you will struggle to curb your spending once you have moved the balance, cut the card up. Any payments you make on a credit card will usually go to pay off the cheapest debt first, as that is how providers make the most money out of you. Play them at their own game.

Spending? Get another card

If you need to spend on your credit card, get a card with the lowest fee for purchases, for the longest time. The Tesco Clubclucard is one of the best here, offering 0 per cent on purchases for 12 months, and you can also get reward points. Halifax All In One has 0 per cent on purchases for nine months, but it is always best to compare credit cards across the board.

Watch your credit report

The more cards you have , the more searches you will have on your credit report, and that can have an adverse affect on your credit rating.

Step 3: If your debts stretch to more than just the credit cards, you are struggling to deal with them, and particularly if they over £3,000 then you may need some more specialist help. Use a debt calculator to find out exactly where you are, and what steps you need to make things better. Get some advice if you need to.