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Money chat with Elinor Quinn
Consumer Credit Counselling Service advisor, Elinor Quinn, stopped by to answer your questions on reclaiming bank charges, consolidating debt and choosing savings accounts.
Jim_V: Welcome everyone, we're kicking off now. Does anyone have any questions for our financial expert?
Bunnie: Are there likely to be any problems getting a mortgage while being in £20k's worth of debt? How long will I need to work before I can apply?
Elinor: Practically anyone can get a mortgage nowadays, even if you've been bankrupt in the past, so from that point of view there are unlikely to be any problems. The issue might well be that a mortgage is unaffordable for you with that level of debt. Also, the fact that you have unsecured debt will impact on how much mortgage lenders are prepared to give you. Some lenders will advance you huge sums even if you have a lot of debt, or poor credit, but they will charge you a lot for the privilege. To get the best deals you really would be better off getting your debt down first and saving up towards the cost of buying the house. I hope that helps.
Bunnie: Thanks Elinor.
JeanPaul: I've heard a lot about reclaiming bank charges - is it really possible and how can you go about it?
Elinor: It really is possible! I've done it myself. The best way to do it is to follow the step by step instructions on one of the free consumer websites - www.moneysavingexpert.com or www.consumeractiongroup.com are the best ones to follow.
The theory is that bank charges are not allowed to be punitive (enforce penalties) under English law. That means banks can only charge you what it actually costs them to bounce a direct debit. Banks are very reluctant to reveal how much this actually costs them because it's commercially sensitive information and a lot of people suspect they are making a big profit out of these charges. Because of this, banks are settling out of court, but be aware that this isn't tested law as of yet. The Office of Fair Trading is currently investigating bank charges and there is a test case going through at the moment, so watch this space! I hope that helps.
Jim_V: Thanks for that Elinor.
robbo: Is it a good idea to get a personal loan to consolidate debt? If so where's the best place to get a personal loan?
Elinor: Generally, it's never a good idea to consolidate debts. This is because borrowing extra money to pay off existing debts almost always costs you more money in the long run, even if your repayments are more affordable. Your best bet is to try and shift your existing debt somewhere cheaper, or to try and cut back a little on your spending to clear the debts quicker.
If you want to get a loan so that all your debt is in one place then a comparison site such as moneysupermarket.com will show you what's on offer. Don't just go to your bank, as there might well be a cheaper rate somewhere else. It depends on what your priorities are as to what loan is best for you - do you want a fixed amount every month at a cheap rate? Or would you prefer a flexible loan that you can overpay on? The latter would mean you clear the debt quicker. In short, there is no best loan - it all depends on what you're looking for. For more advice on this, a good place to look is www.moneysavingexpert.com/ I hope that helps.
Renzo: I still need to get in contact with the bank about two £20 charges they've given me. I'm still waiting for my student loan and I can't pay the bills (one of which is from a cancelled phone contract) or the charges. What's going to happen if I can't pay them for another 10 days? Do I have much chance of getting the charges withdrawn? This has never happened to me before.
Elinor: Some banks are more flexible on bank charges than others. The first thing to do is actually ask your bank to refund the charges by explaining that you're unhappy about them. Quite often they will refund as 'a gesture of good will', especially if this is the first time this has happened on your account. If they refuse to refund the charges, then the next step is to consider reclaiming them back through the county court system - the small claims court.
They might charge you again for the charges that are due to come out if it will make you overdrawn. Unfortunately, this is a very common situation and can leave people very badly off. If you show your bank that you are serious about reclaiming the charges back then it's quite possible that they will refund all charges without you having to take it further. Does that answer your question?
Renzo: Yes it does, thank you very much.
pill_ed: Do you have any tips to help me stop blowing my money all in one go? I get paid monthly and I have usually spent it all by the first weekend.
Elinor: If you still live at home with your parents then you shouldn't have too many essential outgoings. A good way to budget is to divide your money up into different 'pots'. This might mean you have a couple of different bank accounts that you use for different things. So one might be for all of your direct debts and another might be for food. You can also have a 'pot' of money which is purely for fun spending on going out, alcohol or whatever. If you do blow this 'pot' straight away, at least your other outgoings aren't going to be affected.
If you don't live with your parents, then the same thing applies, just expand it a little. Make sure you have all your outgoings separate from your leisure spending, and then you'll never starve!
Maria: I'm considering getting a loan to pay for my postgraduate course, and people keep telling me to compare loans, but I have no idea what that actually entails. What should I look for?
For any loan, check out how you want to pay, how long it's going to take you, and if you can do it more cheaply.
Elinor: How much is your post grad going to be Maria?
Maria: The fees are around £4000, then I'll need living costs too. I do plan on working as well, but the initial outlay for fees is what concerns me.
Elinor: Ok, well it's actually cheaper to borrow larger amounts of money. The interest rates usually drop when loans are over £5k. Are you going to be repaying the loan as you're studying, or will it be deferred?
Maria: Probably deferred.
Elinor: You can get specific career development loans but they often work out expensive. In any loan, what you need to decide is do you want it for a specific time frame? Or do you want to be a bit more flexible and get one where you can over or under pay? A flexi loan normally has an amount you pay every month, but you can then either withdraw it back again, or make overpayments on it if you want to clear it quicker. Does that help, Maria?
Maria: It does, thank you.
nosey: Do you know of any savings accounts where I can save what I want each month and change the amount from time to time? I'd also like to have instant access to the money.
Elinor: Yep, it's an instant access savings account. Most banks and building societies offer them. If you're looking to save money though, your best bet is an ISA if you haven't already got one. An ISA is the most tax efficient way of saving your money.
nosey: The only ones I've seen won't let you put more in on the odd occasion, it has to be a set amount and if you withdraw it, it wont let you put it back?
Elinor: Have a look around and see what's out there. A good place to check is www.moneysavingexpert.com - I know I keep mentioning this website but it's really useful for all kinds of advice about finances. It also has a list of all the current best products, so see what's up there regarding instant access savings.
nosey: Am I right in thinking ISA means you can't get your money back at short notice?
Elinor: No, an ISA stands for Individual Savings Account and it's a tax free way of saving money. Some ISAs have penalties regarding withdrawing your funds, but you don't have to get one like that.
Renzo: Do you have any advice on career development loans? I believe my Broadcast Journalism course will be eligible for one.
Elinor: I'm not FSA-accredited as I'm primarily a debt advisor, so I can't give specific advice unfortunately. However, I'd offer the same advice as was given for Maria's question - for any loan, check out how you want to pay, how long it's going to take you, and if you can do it more cheaply. I hope that helps
TheSovereign: Why are savings taxed?
Elinor: I'm afraid the Government is always after ways to get at your money!
Jim_V: A final word from Turlough -
Turlough: MONEY, MONEY, MONEY! ...Must be funny, in a rich man's world.
Jim_V: Okay then, well thanks everyone, and thanks a lot, Elinor.
Elinor: No problem, thanks for all your questions everyone.