An Introduction to Computer Forensics

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Computer forensics has been defined as a technological, systematic inspection of the computer system and its contents for evidence or supportive evidence of a crime or other computer use that is being inspected. However, computer forensics is also widely used in ivil litigation matters.


The type of evidence sought varies and can include theft of trade secrets, theft of or destruction of intellectual property, and fraud. Computer forensics requires specialized expertise that goes beyond normal data collection and preservation techniques, and care should be taken and selecting a forensics expert.

A computer forensics specialist can use a variety of methods for discovering data that resides in a computer system, including recovering deleted, encrypted, or damaged file information.
Computer forensics specialists generally have experience with a wide range of computer hardware and software than the typical
data recovery expert
may not. Moreover, the specialist often is called upon to testify in depositions and at trial regarding the information recovered.

Computer evidence can exist in many forms or formats. Knowing this possibility, it's possible to recover alternate formats of the same data.

Because the protection of evidence is critical, a knowledgeable computer forensics specialist will ensure that a subject computer system is carefully handled to ensure that no possible evidence is damaged, destroyed, or otherwise compromised by the procedures used to investigate the computer.
The
computer forensics specialist
will take several careful steps to identify and attempt to retrieve possible evidence that may exist on a subject computer system. He will also make certain that extracted and possibly relevant evidence is properly handled and protected from later mechanical or electromagnetic damage.

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SQL Server Database Recovery

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Most companies use relational database management system (RDBMS) and store their data in SQL databases. What happens if after rebooting the server the database doesn't attach and your backup is corrupt, incomplete or outdated?


Have you ever had a drive containing SQL data crash and the files were recovered by a data recovery company but the SQL database is corrupted? One unreadable sector inside a SQL database will not allow the file to attach. First Advantage's team of data recovery specialist's can expertly assist you in the instances to recover your data.
SQL recovery
from drive failures, more often than not, a two-stage process. First, the physical data (raw sectors) must be recovered in order to gain access to the logical data. If the database will not attach to SQL server, then the second stage is SQL recovery.

Media in database servers suffer from the same failure as drives in personal computers. Even the best configured system can fail due to:

* Corrupted database
* Torn page detection
* Deleted data (tables, records, systems objects)
* I/O error in SQL server
* Deleted or corrupted log file
* Database in "suspected" mode
* Unable to restore from corrupted backup file

Is it possible to recover?
In most cases it is possible to repair the database to an attachable state. If the
data recovery
specialists are unable to repair the database to a point to where it will attach, then the specialist will recover as many tables and records as possible for you with First Advantages' specialized recovery software tools. This recovered data can then be merged back into an empty database that your front end will work with.

Getting Started
If the failure mechanism is hardware or file system corruption, then the recovery specialists would require the original media to be sent to First Advantage data recovery. This is because file fragmentation can scatter pieces of the database and log file all over the media. These pieces must be collected and reassembled so we can start our analysis. If the database was corrupted by some other means then a copy on any media will do.

What can you do to help?
Third party SQL recovery and utility programs can cause damage beyond our ability to recover the files so it is best if clients don't attempt recovery with such programs with the original files. For database repair and/or scavenging, it will save time if you can furnish First Advantage with the database structure (perhaps an empty database or backup) and a list of prioritized tables.

After determining what steps will be necessary to complete your recovery, First Advantage will contact you for approval. No work will be done without your consent. As soon as you approve the recovery, our recovery specialist will continue with the recovery effort by analyzing the database and records, extracting the data and rebuilding the database.

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Computer Hard Drive Failure

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If you find that your personal or business computer suddenly stops responding to your commands, or the hard drive simply crashes, what are you going to do? Sure, you can run down to your neighborhood electronics store and purchase a replacement hard drive for your computer, but what about your data on the failed hard drive? How important was it?


Did you save it or back it up? Unfortunately, most home users do not back up their systems, and many small businesses have older back-up procedures that are often ineffective for recovering files.
The first thing to do is to remain calm. Acting rashly can actually do more damage to your data. In case of actual hard drive failure, only a
data recovery professional
can get your data back. The fact that you cannot access your data through your operating system does not necessarily mean that your data is lost.

The only irreversible data loss is caused by overwriting bits, physical damage to the drive platters or destruction of the magnetization of the platters, which seldom happens in the real world. In the majority of cases, the malfunction is caused by a damaged circuit board, failure of a mechanical component and crash of internal software system track or firmware. These situations can be addressed by the experts in First Advantage's Data Recovery Services unit, who are able to recover 100% of the data for 96% of customers.
First Advantage's
data recovery
'rule of thumb' is: if you hear a clicking sound emitting from your hard drive, or if the computer's S.M.A.R.T. function indicates an error during the boot process, something is wrong. The safest bet is to call First Advantage for your expert data recovery needs (1-877-304-7189 or use our contact form here.

After receiving your failed hard drive, a First Advantage data recovery specialist's first step will be to try and save an image of the damaged drive onto another hard drive. This image drive, not the actual damaged hard drive, is where the data recovery specialist will try to recover the lost data.
The next step in the imaging process is to determine if the
hard drive failure
was an actual malfunction, a system corruption or a system track issue.

System corruption and system track issues are normally fixed by using First Advantage's proprietary data recovery software, which was developed by our research and development engineers. System corruption or system track recoveries do not require processing in a clean room environment.

Unfortunately, damage to a hard drive's circuit board or failure of the head drives is not uncommon. In each of these failures, a First Advantage data recovery specialist will work on the system in a clean room environment*, substituting parts such as drive electronics, internal components, read/write arms, writing/reading heads, spindle motors or spindle bearings from a donor drive in order to gain access to the data on the failed hard drive. In most cases, the data recovery specialist is able to retrieve and return your lost data.

It's really very simple. If your data disappears, don't panic. First Advantage can recover it for you, as we've done for thousands of satisfied customers since 1981. If we are not successful, then you pay nothing. What have you got to lose?

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Software and Hardware Recoveries

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So, your computer has just frozen, locking in data essential to your business or personal life. You know you need to contact First Advantage's Data Recovery Service team in order to retrieve it, but you're unsure of the process. Read this article to learn everything you'll need to know about how to get First Advantage on the case, and what happens in the data recovery process.


The initial step in your data recovery process is to contact First Advantage's Customer Care Center personnel (1-877-304-7189). They are highly experienced in answering questions from panicked PC owners, and they will attempt to ease your data anxiety attack. Be prepared to give the call center personnel detailed information about the problem and the circumstances that led to it so they can better address your concerns.

After speaking to the customer care center, the next step is to get the damaged drive to our Data Recovery Services team. There are several ways to accomplish this: you can either ship the system to us via U.S. mail or a private delivery services such as UPS, or you can drop the drive off at one of our branch offices or drop off centers, located in key cities throughout the U.S. (The customer care center can help you find the drop off center closest to you.)
If you elect to ship the drive to us, please remove it from the computer prior to doing so. Not only will you save on shipping costs, but it will help our
data recovery
engineers to more easily perform a diagnostic on the drive. If you elect to bring the drive directly to one of our locations, this step is unnecessary; an engineer can remove the drive for you.

Software Failure Recovery

After the drive is received and the information you provided is analyzed, the defective drive is connected to a data recovery work station, where an experienced data recovery engineer can diagnose the problem.

If it is determined that the drive has not experienced a hardware failure, then our data recovery specialist will first attempt to recover the data by connecting the drive to a work station computer and utilizing First Advantage's propriety software. This will be successful in recovering data that was lost by accidental deletion of partitions or formatting errors. During this process, any existing data is read and then copied onto another, undamaged hard drive. The data recovery engineer will work with the copied data only, in order to prevent further corruption from the damaged drive.

Hardware Failure Recovery

In the event that the software recovery attempt is unsuccessful, the next step is to perform a hardware failure recovery. In this process, the engineer will usually start out by replacing the circuit board. Sometimes, a trial-and-error method will be involved, requiring the engineer to systemically replace various components, such as defective drive heads, so that the recovery can be completed. Since these replacements require compatible parts and firmware, our Data Recovery Services team maintains an extensive supply of essential parts and has a list of responsive suppliers that can quickly fill our parts requests.
In both cases, the recovery engineer will substitute the defective part with a working one until he or she is able to gain
access to the hard drive data
. In 96% of all cases, we are able to recover 100% of the data.

So now that you know what to expect every step of the way, give First Advantage's Data Recovery Services team a call. Either we'll recover your data and return your system to you (and even pay for the shipping!), or you won't pay us a dime. That's our guarantee, and we stand proudly behind it.

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RAID Data Recovery

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A redundant array of independent drives ("RAID") recovery is much more difficult than a single hard drive recovery and should only be attempted by a qualified specialist, like the experts in the Data Recovery Service unit of First Advantage.


RAID manufacturers set up the internal controls of their arrays in different configurations. Since the RAID configuration is most likely proprietary, it is almost never disclosed to or shared with other data recovery companies.
That's why RAID data recovery engineers must have
years of experience and be able to write recovery programs for each separate RAID data recovery operation.

The first step in the data recovery process is to get the RAID drives' data copied on to a server or other hard drive so that the data set can be re-assembled.
Each recovery procedure is unique to a particular RAID array. For example, a level 0 RAID (also known as a RAID 0) is the most challenging type of recovery because there is no fault tolerance and thus, no margin for error. A RAID 0 is made up of two drives, with the data striped in small sets across one or both of them. Since there is no parity in a RAID 0, the information that was saved on a failed drive is not replicated elsewhere, meaning that it will be difficult or impossible to recover.
On the other hand, a RAID 5 is made up of three or more drives and does offer parity data, so when one drive fails, a replacement drive can be used for recovery and the array can be rebuilt. However, if two drives of a RAID 5 fail, the recovery process becomes more difficult. If enough data can be saved from the malfunctioning drives, an experienced
RAID recovery
engineer can usually succeed, because the RAID parity is still available.

Each
RAID data recovery
is unique, because manufacturers set up their internal arrays differently. A RAID recovery engineer must be able to determine the arrangement of data and the parity cycle to recover the data and rebuild the RAID. The data is accessed on a file system level instead of on a controller level. Normally, an NTFS file system is used in this type of recovery, because the logical drives will be providing the basis for working on a RAID image. This allows the RAID recovery engineer to assemble bits and bytes after a successful recovery using propriety software developed by First Advantage.

RAID data recovery is certainly not recommended for amateurs, nor for the weak of heart. First Advantage has successfully recovered data from RAIDs as well as all popular types of storage media since 1981.

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Computer Hard Drive Failure Recovery Processes

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If your personal or business computer suddenly stops responding to your commands, or the hard drive simply crashes, what can you do?


Of course, you can run down to your neighborhood electronics store and purchase a replacement hard drive for your computer, but what about your data on the failed hard drive? How important was it? Did you save it or back it up?

Unfortunately, most home users, and many business users, do not back up their systems. Moreover, many small businesses have older back-up procedures that are often ineffective for recovering files.
If you need to
recover data on the hard drive
, the first thing to do is avoid trying to reboot or doing anything that involves the hard drive. Doing so can actually do more damage to your data.

In the case of actual hard drive failure, only a data recovery professional can get your data back. And the fact that you cannot access your data through your operating system does not necessarily mean that your data is lost.

The only irreversible data loss is caused by overwriting bits, physical damage to the drive platters or destruction of the magnetization of the platters, which seldom happens in the real world. In the majority of cases, the malfunction is caused by a damaged circuit board, failure of a mechanical component and crash of internal software system track or firmware.

As a "rule of thumb," if you hear a clicking sound emitting from your hard drive, or if the computer's S.M.A.R.T. function indicates an error during the boot process, something is wrong. You should immediately stop using the hard drive in order to avoid causing further damage and, potentially, rendering the information on the hard drive unrecoverable.
After receiving your failed hard drive, a
data recovery
specialist's first step will be to try and save an image of the damaged drive onto another hard drive. This image drive, not the actual damaged hard drive, is where the data recovery specialist will try to recover the lost data.

The next step in the imaging process is to determine if the
hard drive failure
was an actual malfunction, a system corruption or a system track issue.

System corruption and system track issues are normally fixed by using a specialist's data recovery software. System corruption or system track recoveries do not require processing in a clean room environment.

Unfortunately, damage to a hard drive's circuit board or failure of the head drives is not uncommon. In each of these failures, a data recovery specialist should work on the system only in a clean room environment. There, the specialist can substitute parts such as drive electronics, internal components, read/write arms, writing/reading heads, spindle motors or spindle bearings from a donor drive in order to gain access to the data on the failed hard drive. In most cases, the data recovery specialist is able to retrieve and return the lost data.

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Exchange Server Database Recovery?

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E-mail servers are an integral part of business success in today's environment. A critical services database that changes very often, such as messaging and collaboration data, should be fully protected by a well-tested back-up solution.


However, back-up devices can also fail - leaving the client with serious problems. Standard repair utilities within the mail applications can cause further problems if media failure or structural damage has occurred.

First Advantage supports Microsoft Exchange Server version 5.5, 2000 and 2003. Our Microsoft Certified Engineers are able to recover the mailboxes located in the Information Store from just about any kind of "Jet Engine Error," "Read Verification Error," database corruption, over-sized files or other file problem.

Typical situations that our experts can address include:

* Inconsistent Information Store state
* 'Dirty' shutdown
* Corrupted header information
* Damage from ESEUTIL
* Duplicate keys (identifiers)

First Advantage's standard services include recovery of:

* E-mail addresses from Active Directory storage
* Folders, messages and file attachments
* Notes, contacts, tasks and appointments
* Creation dates for all objects
* Formatting for RTF and HTML messages

First Advantage's
data recovery
engineers have the capability to recover your Exchange Server Information Store Files from many forms of backup tapes.

Critical Information:
Widely available recovery utilities can delete valuable data. First Advantage's recovery experts suggest that you make a copy of your .EDB, .STM and .LOG files prior to:

* Attempting to attach or repair a damaged Information Store
* Opening a tech support case with Microsoft
* Sending your database to any other company

After determining what steps will be necessary to complete your recovery, we will contact you for approval. No work will be done without your consent. As soon as you approve the quotation, our engineers will continue with the recovery process.

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How Is My Data Recovered?

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One of the First Questions You Need To Ask About
Data Recovery - "How Is My Data Recovered?"


It's one of the most often asked and necessary questions about data recovery - "How do you get my data back?"

There's really nothing magical about it, although sometimes recovering data can seem almost miraculous.

The Right Knowledge and the Right Tools
Proper data recovery requires two things: knowledge about the proper procedures for data recovery and the right tools, i.e., technology.

Not all data recovery companies offer the necessary knowledge and technology. So in choosing a data recovery company, ask about both. Find out about the credentials and accreditations the people who'll be working on recovering the data.

Then find out what type of facilities (more on that in a moment) and technologies they use.
The first thing a
data recovery
firm should do is
evaluate the hard drive
and determine if the data is recoverable. While doing this, they should also determine what recovery process will be necessary.

Two types of failure in a hard drive
Generally speaking there are two primary forms of failure in a hard drive: logical and physical. Logical failures are usually the result of file-system corruption. Physical failures can be either mechanical or electronic.

The determination of the type of failure will determine the next steps to be taken.

If the drive failure is a logical issue, an evaluation of the file system will be performed to try and repair the corruption. If this doesn't work, then a very low-level scan will be performed, searching all sectors of the hard drive for files.

If the files are located, they can then be copied to a CD-ROM, DVD-ROM or another hard drive. Be aware that logical recoveries can take up an enormous amount of time, especially if the drive is on the verge of physical failure.

If the problem is a physical failure, recovery can be more difficult. Again, there are two categories of physical failure, mechanical and electronic. Physical failure usually necessitates having matching parts to get the drive functioning again. So it's important to find out if the data recovery firm has access to parts that match your hard drive.

Clean Rooms
If the firm you are working with has bona fide expertise in data recovery, they should also have a "Class100 Clean Room." A Class100 Clean Room is designed to maintain exceptional air purity, containing less than 100 airborne particles larger than 0.5 microns in each cubic foot of air. Such an environment is vital for protecting the sensitive internal components of hard drives. If it is going to be necessary to perform an invasive procedure on a hard drive, a Class100 clean room or better is needed.

Ask questions
A data recovery firm should be prepared to answer your questions about how they will recover your data. They should have no problem with evaluating the problem and discussing the procedure for recovery.

Ask about the availability of a "Clean Room." Ask about the type of failure they've diagnosed.

Doing so can help you determine how legitimate a data recovery company they are. For instance, if they don't have a Clean Room, it may mean that can't properly deal with physical failures in the hard drive.

Get answers that satisfy you that the company has the necessary knowledge and tools to do the job right. If they don't, you need to find another data recovery company fast.

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Data Recovery - A Sea of Confusion

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Your hard drive stopped responding and you don’t know what to do or what not to do. You call the OEM of your computer for support. After a couple of hours on the phone with tech support, it is determined that indeed the drive is failed. They tell you that you will have to seek professional data recovery services.

You do a Google search for “data recovery” and find yourself drowning in a sea of confusion. You search website after website and see options and pricing ranging from $179.00 to $4000.00. Who do you call, who do you trust? Right now you’re feeling what I have coined as “Data Loss Anxiety” and the symptoms are many. I would like to help you through this chaotic period by briefing you on some basic do’s and do not’s, a few industry misconceptions and why you should use First Advantage for your data recovery requirements.

Can I Fix It Myself?

Firstly, don’t panic, you have almost a 100% chance of getting your data back so relax. What we don’t want to do at this time is hinder any chances of recovery. Most importantly, if your drive is making any strange noises and the system BIOS does not see it as being physically present, do not try any further. There is no software or hardware available to the public that will allow you access to the drive. If your system does see the drive being present and it sounds normal but it won’t boot, try slaving the drive into a working system. This may give you complete access to your data. One more thing, please don’t put your drive in the freezer, any amount of condensation will destroy the media when you spin it up. Please see our tips page for more info on what you can safely try.

The Industry Today

Data recovery companies are popping up like mushrooms all over the web. The vast majority of these companies are not able to recover from physical failures. They are software only shops that advertise full service. Their MO is to advertise super low flat rate pricing and cherry-pick what they can handle with minimal effort. All other jobs beyond their capability are tagged as failed. They will contact the client and tell them that the drive is not recoverable when in fact it is. This discourages the client from pursuing any further attempts for recovery...it’s an absolute crime. There are only 4 true full service cutting-edge companies in this industry and we’re the best of them. A big shake-down is occurring right now in this business and only those that can produce will survive.

Why Pick First Advantage?

If you've ever required data recovery in the past you may have used us. We are the original Data Recovery Services, Inc. headquartered in Dallas Texas. Established in 1981, DRS has remained the authority in the data recovery industry serving a global market. In March of 2005, DRS was acquired by First Advantage Corporation (NASDAQ: FADV), a global risk mitigation company looking to expand their service offerings. First Advantage offers a range of recovery services from a simple floppy disk to the most complex fiber channel RAID configurations. All of our procedures are done in house by engineers handpicked from around the world. We develop and manufacture hardware solutions that our competition would die for. Our facilities are cutting-edge with ISO class 5 or better clean rooms. When it comes to pricing, we offer a value added hourly model that our clients agree is the most attractive in the industry. We have a REAL 96% success rate and hear it from new clients all the time “I’ve been told that if First Advantage can’t get it, nobody can”...it’s true.

Please Ask Questions

When you’re doing your due diligence don’t be afraid to ask questions. Put the representative through their paces. Here are some FAQ’s that you really should ask and the answers that you should be given and why.
How Much Will It Cost?
Data on computer storage media can be lost physically, logically or a combination of both. A comprehensive diagnostic must be performed in order to give you a firm, fair price. Typically, you should be given a range on your initial call. The more detail you have of the symptoms, the narrower the range will be. If a company gives you a flat price on your initial call, hang up and go to the next. After a free comprehensive diagnostic, First Advantage will give you a firm price quote with no hidden fees.
How Long Will It Take?
Modern hard drive recovery is very complex and the final result is all based on the success of one routine. This routine involves acquiring a physical sector dump (image) from the drive. Typical turn time for a single drive recovery is 2-5 business days if the drive responds normally to procedures. It can however take longer than this if there are hard to find parts or the drives media is degraded. All firms in this industry have had the occasional drive that reads for three weeks before completion. If a recovery company guarantees you a timeline over the phone, they’re blowing sunshine up your skirt. First Advantage will never guarantee a completion time for any project...we can only estimate. We work as quickly as we can to get you back up and running in the shortest period of time. We do offer critical response and expedited processing to shorten turn times. These premium services push your project to the front and dedicate resources to your project until completion.
What If you’re Unsuccessful?
Some companies will charge you an “attempt fee” if they fail your recovery. This is another reason to stay away from the mushrooms described earlier in this article. Most reputable companies, as is with First Advantage, will not charge you anything for a failed project. Sometimes there are recoveries that are marginal due to unreadable, damaged areas of the drive. Unread areas can cause everything from file corruption to data that is completely missing. We have implemented a Value Assessment Program for just this reason. We will work with you on the cost of your project to give you a fair price on the data that is viable.
How Will I Get My Data Back?
Typically, when a user has a drive failure they will remove the bad drive and go ahead and install another to reload and get going again. You should receive back a universal media that is compatible with your system so you can easily copy the recovered data back to your fresh system. We make sure that that’s exactly what you receive. Most of our clients will receive DVD or an external USB drive free of charge.
Is My Data Confidential And Secure?
A data recovery facility should be secure physically and logically. By this I mean having a monitored security system on the facility, secure electronic connectivity with the outside and data storage management and recycling. All First Advantage Facilities are ISO 27002 certified. First Advantage will not disclose any client information to third parties except (i) pursuant to a final, non-appealable court order or (ii) as required by federal, state or local law.
What If My Recovery Gets Lost In Shipment?
This is good question. First Advantage, as other industry leaders do, creates a “sector-to-sector” image of all incoming hard drives to prevent further possible data loss and keep your original drive unchanged. We retain your image/data for 5 business days after you have received the recovery to insure completeness and reintegration of the recovered data. “Budget” data recovery companies are working directly from problematic drives. Good luck getting any post recovery support from them.

The Bottom Line

Data recovery is not for everyone. You must weigh the cost of recovery against recreation of the data. In cases such as lost photos or video footage, the data cannot be recreated so easily if at all. At First Advantage, we have a genuine interest in recovering your data. We are on a quest to prove that we are the best in the industry. If you really and truly must have your data back, you’ve come to the right company. If you have any questions, please don’t hesitate to call and ask for me directly, I’ll be happy to chat with you about your project. Remember, back up early, back up often.

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How To Survive The Credit Crunch

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The credit crunch has been with us in the UK for over a year now and, even though a lot of people tried to deny that it existed and was just a term invented by the media.


Whilst other individuals claim that they have not been affected by the slow down in the economy, a large percentage of individuals and families are now starting to feel the full impact of the crunch, even if they haven’t done so previously, particularly those people who have debts through mortgages, personal loans and credit card balances.

It is not only individuals who are suffering however, many businesses are going through particularly tough times at the moment, leading to increased fears over job security. We have all seen the devastating effects on a large number of the high street banks and other financial services companies, such as loan companies, but the current economic slow down is now having a knock on effect on many businesses in other sectors as well, as many people are starting to cut back on their expenditure.

So if you’re one of the many people who are feeling the pinch and perhaps struggling to keep up with the monthly mortgage and loan repayments, or seeing you credit card balances increasing at an unhealthy rate, or maybe you’re just worried about job security and the possibility of unemployment in an uncertain future, what can you do to avoid falling victim to the credit crunch, or at least limit the damage done to your own personal financial situation, before we see the light at the end of the tunnel.

Budget Planner

The first stage in sorting out your financial situation and creating a bit of stability is to organise a budget planner by carrying out an income versus expenditure exercise.

Firstly, write down your total take home pay and other income from things such as any state benefits for which you are eligible, plus any overtime or bonuses (although you should be careful when including overtime or bonuses as these tend to be the first things to get cut by employers when times start to get tough).

You should then list all your regular expenses, including luxuries and non-essential items, not just bills. Be honest with the list, if you leave things off you are only lying to yourself and the exercise will not be effective. It’s also important to write down each expense so that you can see exactly where all your money is going.

Cut Down On Unnecessary Expenses

Once you have completed your budget planner and have a full breakdown of your income versus expenditure, it may become immediately obvious where it is possible to make monthly savings.

Sadly, it is normally the luxuries in life which are the first things which must be cut back on, such as going out for an evening, gym membership and even (dare I say it?) cutting down on smoking and drinking. Other savings can be made by perhaps changing where you shop for food and planning meals before you go to the supermarket and only buying what you actually need once you get there.

This can make a big difference to the cost of the weekly shopping trip. Another idea is to leave the car at home for short journeys and walk instead, saving on petrol costs and getting you fit at the same time!

Build Up An Emergency Fund

It is important to have an emergency fund of money which you are able to fall back on in the event of difficult times, such as redundancy, sickness or unemployment.

Ideally the amount of this fund should be in the region of at least three times your committed monthly expenditure (the things every month which you have to pay, such as personal loans, mortgage and utility bills) to help you get through until you get back on your financial feet. A larger sum is or course better, but even a small amount of money put to one side can make a difference to the situation and reduce the potential of increased levels of debt.

Maintain All Protection Plans

One area of your monthly expenditure which you should definitely not cut back on is the regular payments made on any type of protection plan, or insurance policy you may have. This could include payment protection policies, income protection, or life and critical illness cover.

At times when money is tight, these are often the first things to be cancelled, but they were all taken out for a reason, usually this is to protect your family and mortgage or loan repayments in the event of anything untoward happening to you and it is vital to maintain these contracts in order to keep the benefits and peace of mind which they offer, particularly in an uncertain world where unemployment is increasing and high levels of debt can lead to health problems.

If you do not have any such policies in place, you should contact an independent financial adviser who can offer suitable advice on the cover and type of products you need. Even if you already have some policies in place, it is worth while reviewing exactly what benefits and level of cover these offer, to make sure they are still adequate to meet your requirements.

Maintain All Loan Repayments

It is essential to keep up to date with all the repayments on your personal loans, mortgage and credit cards bills, as this will keep your credit score at a higher level.

Falling behind with loan repayments, or even making them a few days late of the due date, can have dire consequences for your future ability to be accepted for any type of credit or loan, as each missed or late payment will leave a mark on your credit record, reducing your overall score.

In addition to this, late payments and arrears on loans and cards usually incur a penalty charge and in some cases, additional interest. In the worst case scenario, getting into arrears on your mortgage, or a secured loan, can eventually lead to your home being repossessed and even with unsecured loans and other debts, a build up of arrears and missed payments can lead to County Court Judgements (CCJ’s) and stop you from obtaining future credit.

Clear Credit Card Balances And Overdrafts

Credit cards are, in most cases, undoubtedly one of the most expensive forms of credit available, along with bank overdraft facilities.

Both of these methods of borrowing charge one of the highest rates of interest around and even when times are good, these should be the first things to be paid off, but in the current economic climate this is even more important.

It may be all very well to say just pay off your credit card debts, we all know that it’s not that easy, if it was, nobody would have any debts at all and you wouldn’t be reading this article! But there are options to get rid of credit card balances.

Ideally you should concentrate on paying more than the minimum required monthly repayments, in order to clear the balance quicker and save further interest. Other options available would be to transfer your credit card balance to a new card which offers zero per cent interest for a certain period, allowing you to clear the debt over a period of time without paying exorbitant levels of interest.

If this is unavailable to you, another option could be through a debt consolidation loan. Although this option would still charge interest, the amount charged is likely to be considerably less than that of a credit card. Check the rate payable both on the loan and your card to ensure this is the right thing to do, before you sign up.

Debt Consolidation Loan / Remortgage

If you are in a situation, as many people are, where you have several different loans and credit card balances with a number of providers, all paying reasonably high levels of interest, it may be possible to cut your monthly expenditure by bringing all your various debts together with just one provider by taking out a debt consolidation loan.

This option could work out significantly cheaper and also much easier to manage every month, as the interest rate charged is likely to be less than that of the debts being repaid, particularly if you opt for a secured loan and you will only have to make one payment each month.

As an alternative to a debt consolidation loan, you could opt to re-mortgage your home to consolidate your various loans and cards that way. If you have early redemption penalties which would be applied to your existing mortgage, this may not be a realistic option, however your existing lender may be able to offer a further advance on your existing loan.

You should take care with either of these options however, as by consolidating existing debts, in many cases you will also be extending the term of any existing commitments and although the monthly repayments may be considerably lower on the new loan, these will be made for a longer period, with interest also being charged for longer and you could actually end up paying significantly more over the long term than you would have done on your original debts.

Still In Difficulty?

If you are still struggling to keep up with the repayments on loans, mortgages and cards and are worried about falling into an arrears situation, you should always contact the provider in the first instance.

A lender will look favourably on someone who approaches them when financial problems first arise and will take a sympathetic view to your problem, offering help and a solution wherever possible.

The worst course of action is to bury your head in the sand and hope the problems will go away, this is the most likely route to having a CCJ issued against you, or even the possibility of repossession.

Help on financial matters can also be obtained from places such as the Citizens Advice Bureau and debt counselling services. Before taking out any new plans or loans, it could well be beneficial to seek professional advice from an independent financial adviser (IFA), who is able to select products and offer advice across the whole of the market.

Finally, you should think very carefully before committing to any particular one course of action, as it is often difficult to undo something once you have started. Weigh up all the pro’s and cons of the various options and make sure that the one you take is the best possible route to meet your own personal needs and requirements.

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Is Bankruptcy Really The Answer?

. :~ ALIVE FUN ARTICALS ~: .

Over the course of the past twelve months or so, since the start of the credit crunch, many people have been struggling to keep up with their regular repayments on their mortgages, personal loans and other debts such as credit cards, leading to the inevitable situation of building up a large amount of arrears on their loans, receiving letters from their creditors demanding money or threatening court action and in extreme cases looking at the distinct possibility of having their home repossessed.


As the UK economy continues to slow down even further, the prospect of a recession and increasing levels of unemployment seem ever more likely and this is only going to make matters worse for those individuals who may already be struggling to keep up with their finances.

Many people who find themselves in the situation of having spiralling debts, without being able to see any way out of the problem, believe that they have no alternative but to file for bankruptcy to escape their predicament, without being aware of the full implications of their actions, both immediately and in the future, or what other steps they may be able to take to avoid this very public and humiliating admission of financial failure.

There are, of course, both positive as well as negative aspects to a person declaring themselves bankrupt and in some cases there could be no alternative, or bankruptcy may be the best course of action if a person’s level of debt is so extreme that they realistically have no prospect of repaying the amount they owe.

Declaring oneself bankrupt is an extreme measure and should be considered only as a last resort as a solution to the problem. In this article, we try to look at both the beneficial as well as detrimental aspects of bankruptcy and what alternatives may be available to an individual who may be considering this route.

On the positive side of the argument, once an individual has filed a petition for bankruptcy with the court dealing with their case, they will no longer receive the regular bundles of post from loan companies and other creditors demanding payments, as they are not allowed by law to contact the person directly once they have filed with the court, all correspondence must be handled by the administrator who will be appointed by the court.

Furthermore, creditors will be unable to proceed with any foreclosures or repossession proceedings until the full court process has been completed. So this can relieve a lot of the stress and worry which being unable to repay debts can often cause and can at least ease some of the pressure in the short term.

It may also be possible, in some cases, for an individual to retain some of their possessions, such as their house or car, even though they have been declared bankrupt and even though the person in question will be declared bankrupt for a period of three years, with the bankruptcy showing up on their credit file for a considerable period of time beyond the date they become discharged, it is possible for the individual to start repairing their credit rating straight away, by handling their ongoing finances in a responsible manner.

A bankruptcy order can also “clean the slate” with personal loan and credit card companies etc, as most creditors will accept significantly less than the total balance of the outstanding loan, as full and final settlement of the debt. The view of the lender is that they are better off getting paid some of the debt now, rather than none of it at a later date! Once a creditor has accepted a settlement figure and this amount has been repaid, the loan is considered cleared and the lender is unable to chase the borrower for any more money in the future.

On the negative side of the argument, when a person is declared bankrupt, their name is published in the local newspaper and a public record of the event is retained by the court. They will also be excluded from certain occupations or jobs, such as those working in public office, or those in the financial sector such as banking. For those who own a business, this must be closed down, with the inevitable consequences for any employees.

Not all debts are necessarily cleared through bankruptcy, student loans, for example, would not be cleared and this debt would still remain outstanding after the bankruptcy ended.

Once a person has been declared bankrupt, they will find it practically impossible to obtain any type of credit through usual methods such as mortgages, credit cards and personal unsecured loans.

Even once they have been discharged from their bankruptcy, it will still show up on their credit file for several years and the majority of lenders will be extremely reluctant to offer any type of loan or other credit and even if they do, the high level of interest charged is likely to make the loan prohibitive to the borrower. If an individual has managed to retain ownership of their own home, it may be possible to be accepted for a secured loan on the property, but once again, the lender would charge interest at a rate which reflected the previous financial difficulties and also only offer a low loan to value ratio.

So what alternatives exist for someone who may be considering bankruptcy? As soon as a person realises that they are in financial difficulty, they should contact their various creditors to see what help they can offer. In many cases, a solution can be agreed with the lender which benefits all those concerned and stops the problem becoming any worse. This can include measures such as paying interest only for a period of time, or rescheduling the loan in order to reduce the monthly repayments and make the debt more manageable.

Help and advice is available from a number of sources; the Citizens Advice Bureau (CAB), Financial Advisers, debt management companies and insolvency practitioners can all provide valuable assistance and advice for those in need. For a person with loans and debts with a number of different creditors, an Individual Voluntary Arrangement (IVA) could be taken out with a debt management company, which could reduce the level of monthly repayments required and is one step short of bankruptcy.

As we have mentioned previously in this article, whilst bankruptcy can be beneficial in many cases and in some cases, the only possible solution to a person’s financial problems, it is an extreme measure and should only really be considered as a last resort, once all the other possible avenues have been explored and exhausted.

The implications and repercussions of bankruptcy can be devastating and long lasting for an individual and a person in this desperate situation should contact their creditors and take advice at the first sign of financial difficulty in order to avoid this route.

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Changes To PPI Rules Could Mean More Expensive Personal Loans

. :~ ALIVE FUN ARTICALS ~: .

Over the course of the past few months, there have been great concerns over the practices and methods used in connection with the sale of Payment Protection Insurance (PPI) and Mortgage Payment Protection Insurance (MPPI) and we have reported on many of these issues on a regular basis in our news section.


Payment Protection Insurance is usually taken out, or sold alongside a personal loan or a credit card application and is designed to meet the regular monthly loan or card repayments, in the event of the policyholder becoming unemployed, or suffering from an accident or sickness. Mortgage Payment Protection Insurance is exactly the same as PPI, but designed specifically for use with a mortgage loan and the associated insurances.

Both PPI and MPPI can offer essential benefits and peace of mind to borrowers with loans and mortgages, particularly in these uncertain economic times, when unemployment and redundancy is becoming a real threat for many employees, as many companies continue to cut their staff numbers in order to reduce costs.

But there have been concerns from regulators regarding the sales practices adopted by many loan companies automatically selling PPI policies at the same time as they arrange a new personal loan for a customer.

Over the past year, the Financial Ombudsman Service (FOS) has received more complaints from consumers regarding PPI and MPPI policies, than any other area of business. These range from not being eligible for the cover which was taken out, to not realising that they had actually been sold a policy in the first place.

The other major concern was that, due to the fact that PPI is often sold to the customer at exactly the same time as the loan, many people think that it is a compulsory policy, which must be taken out with the loan provider. As a result of this, consumers are not given the option to shop around for cover from a range of providers, or have suitable time to think about the policy they are being sold.

Due to these concerns, the Competition Commission (CC) has conducted an investigation into the sale of PPI and MPPI policies in connection with the Financial services Authority (FSA) and the Office of Fair Trading (OFT) and has now proposed a number of measures which should increase the level of competition in the PPI market place, thereby reducing the cost of cover for consumers and in turn reduce the level of new complaints being made about the products.

The new proposals are as follows:

* A lender will not be allowed to sell any type of PPI policy at the same time as, or within 14 days of arranging a new loan for a customer. This will allow the consumer to shop around for a quote from different providers and consider the cover they require.
* The loan provider must also provide the customer with a “personal PPI quote”, which highlights the costs and benefits of the plan both individually and when added to the loan.
* The CC has also proposed a ban on the sale of single premium PPI policies, claiming that this does not give the customer sufficient ability to change policy providers part way through their loan repayment schedule.
* All providers of PPI policies must show certain information in their advertisements, including the cost of cover per £100 of benefit and a statement that the cover is optional and also available from other providers.
* Loan and credit companies should advertise PLPPI (personal loan cover) and SMPPI (second charge mortgage, or secured loan cover) in with their adverts for their main product.
* PPI companies should provide details of their plans to the FSA, who will use the information gathered to generate a comparison table on its website.
* PPI companies should also produce a statement for customers every year, in order to help them review the cover they already hold and if they should change to a new provider.

These are, of course, only proposals at the moment and whilst initially they may seem like a good idea, offering loan customers more protection, clearer information and a wider choice of provider for their cover, opinions within the industry vary greatly and those passing comments all seem to have valid points to make.

The Association of British Insurers (ABI) has described the ban on selling PPI at the same time as a new loan as “devastating” for borrowers. Due to the fact that an applicant for a loan will have to wait at least two weeks before applying for PPI cover will mean that a large percentage of individuals are likely to not bother with this cover at all, effectively leaving themselves unprotected.

A spokesman for the ABI said “This is devastating news for consumers. By effectively denying consumers PPI in the very economic climate that they need it most, the Competition Commission has got it completely wrong. Unemployment claims on PPI policies have grown by 69 per cent in the last twelve months, showing just how valuable this cover is proving to be.”

The Finance and Leasing Association (FLA), the trade body which represents a large number of personal loan companies who already sell PPI, agrees with the ABI and has urged the Competition Commission to reconsider its proposals, as these moves are likely to leave a high percentage of borrowers unprotected and also have the effect of raising the cost of a personal loan.

However, Paymentshield, the independent provider of PPI and MPPI, has welcomed the news, claiming that the proposals will open up the PPI market to wider competition and enable borrowers to obtain cover at a much cheaper cost than they might have done by taking the cover directly with their loan provider.

Shane Craig of Paymentshield said “The major obstruction to consumers getting a fair deal on payment protection insurance has finally been blasted out of the way, a decision that should have been made a long time before now but one that is very, very welcome.

Lenders’ ability to sell their own PPI at the same time as a loan has been one of the single most unfair financial practices of recent years and has cost consumers billions of pounds.” A recent survey conducted by Paymentshield has revealed that a customer who took a PPI plan with them, rather than with the loan provider has on average, saved around £2,700 over the term of the loan, which just goes to show how much profit loan companies are making on their own PPI policies.

One major worry is that by not being allowed to sell PPI at the same time as a personal loan, lenders will lose out on PPI sales, along with the large profits which go hand in hand with the policies. This has raised concerns that to compensate for this loss, loan companies will be forced to increase the rates and charges they apply to their products, thereby making the basic loan more expensive for the consumer.

A spokesman for the website Fool.co.uk said “Payment protection Insurance has not only been the icing on the cake but the cake itself for loan providers. The difference between taking out a loan with insurance and one without can mean the difference between borrowing money at 17.8 per cent and 7.9 per cent. So borrowers need to be alert to a possible backlash from loan providers following the Competition Commission’s move to ban PPI distributors from flogging the insurance at the same time as selling the underlying loan.”

The CC seems to have stirred up a hornet’s nest by making these proposals and as we can see from the reaction within the loan industry, many groups will be trying to get them to change their minds, or at least alter the proposals. So far this is at initial proposal stage, the final report is due to be published in January next year and it will be interesting to see if the CC is likely to bow to industry pressure, or whether they stick to their original proposals. We will let you know as events unfold.

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What Is The Most Suitable Type Of Credit For My Personal Needs?

. :~ ALIVE FUN ARTICALS ~: .

Practically everybody living in the UK today has, or has had at some time or other, some type of credit agreement, whether this is in the form of a personal loan, overdraft, credit card or mortgage.


The majority of borrowers are likely to be able to tell you broadly how each method of borrowing differs from the others and also what the similarities might be, as well as probably have a reasonable idea as to what the relative costs of each method may be.

Despite this vast wealth of apparent knowledge, many people still find it difficult when it comes to choosing the best method of borrowing to suit their particular needs and requirements and also when it could be advantageous to take out one form of credit over an alternative method of borrowing.

In this article, we aim to look at the various alternatives which are available for someone needing additional money, along with the advantages and disadvantages of each option.

One of the most important factors to take into account is how long a term the borrowing is going to be over.

Overdrafts

For short term borrowing, for example, funds to see you through until the next pay day for a week or two, then an overdraft is probably the best option. Although the interest rate charged on overdrafts tends to be one of the highest rates around, the borrowing is usually only for a short period and therefore the cost is minimal. Also, if you have an authorised overdraft facility on your current account, this can be used whenever required, without having to apply for the credit and you do not have to give a reason for the borrowing to your bank.

Some types of current account will allow a free or reduced rate overdraft on small amounts, but with any account, if you exceed the agreed facility level and use an unauthorised overdraft, then there are likely to be penalties and a higher interest rate charged. If your account is constantly overdrawn, then it may be more cost effective to consider an unsecured loan instead, as this will certainly be a cheaper option.

Credit Cards

Credit cards have become extremely popular over the course of the last few years and most people have such a card, even if they tend not to use it. Credit cards can be extremely useful for things like emergency bills, or repairs, which were unexpected and therefore not budgeted for. They are also very useful for making large or expensive purchases, such as expensive household items or holidays, as most credit cards offer insurance as a built in part of the facility.

However, as with overdrafts, credit cards are usually a rather expensive way of borrowing money and as such should be treated as a short term borrowing solution. With most cards, if you clear the full balance every month as the bill arrives, there will be no interest charged, but if you allow a balance to build up, the interest can be extremely expensive and the minimum monthly repayment will probably only just cover the interest charge.

Many credit cards now offer 0 per cent balance transfers from other card providers for a limited period, usually up to 12 months, which can save a large amount of money in interest payments, but there is often a fee for doing this. Credit cards must be used with care, too many people have got themselves into an awful lot of trouble by running up large balances on cards, which they then have no way of repaying, so be careful.

Loans

When it comes to borrowing money, the first thought most people have is to take out a personal loan of some kind, and usually this is the most appropriate route to take for things such as purchasing a new car, or making home improvements, for example.

The problem is that there is such a wide choice of personal loans available in the market place, not only between different providers, but also in the amount to be borrowed and whether to choose a secured loan or an unsecured loan.

Generally, unsecured loans are used to borrow smaller amounts of money, usually up to a maximum of £25,000 and these run over a shorter term than secured loans, usually up to a maximum of 7 years.

In many cases the rate of interest charged on an unsecured loan becomes cheaper as the loan size, or term increases. Therefore, a loan of £3,000 is likely to charge a high rate of interest, whereas a loan of between £5,000 and £10,000 is likely to be cheaper and a loan in excess of £10,000 will be cheaper still.

However, don’t be tempted to borrow more than you actually need, just because the rate is cheaper, as the money plus interest all has to be paid back eventually! When choosing what term to take the loan over, it makes sense to keep it in line with the item being purchased.

For example, if you change your car every four years, then a four year term would be appropriate on the loan. A personal loan to pay for a holiday however would make more sense over a 1 year term, as you will probably want another holiday next year as well and you don’t want these debts to mount up.

Secured loans work on the same principal as unsecured loans, apart from the fact that the lender takes some kind of security against the loan, usually the borrower’s house. This means that if the borrower defaults on the loan, the lender has the right to reclaim the outstanding debt, plus costs, from the secured property in question. This means that it is possible to lose your home if you opt for a secured loan.

Secured loans are usually used for major expenses, such as major home improvements, or extensions, or even in some cases debt consolidation and often run for a much longer term than an unsecured loan, often up to 25 years or possibly longer. As a result of this higher lending amount and additional security for the lender on the loan, a secured loan usually charges a lower rate than that of an unsecured loan, but will cost significantly more over the term due to a larger loan amount and much longer repayment period.

A mortgage, or homeowner loan, is the cheapest rate and longest term loan available and for most people it is the only way that they are able to purchase their own home.

The typical term is for 25 years, but this may be shorter or longer than this, often depending upon the age of the applicant. A mortgage o homeowner loan is exactly the same as a secured loan, except that it takes a first legal charge on the property in question rather than a second charge, as in the case of a secured loan.

This makes the loan a better risk for the lender, as they will have first call on any money from the sale of the property in the case of a default on the loan. There are many different types of mortgage product available and it is worthy seeking professional financial advice before choosing a suitable product, to ensure the loan taken is the most suitable to meet your needs and requirements.

To conclude, there are many different options available when it comes to borrowing money and you should think extremely carefully, checking out all the various alternatives before committing to any one particular route.

If you are in any doubt about what you require, it is worth taking the time to seek professional advice from and independent financial adviser. Even if the adviser charges you a fee for his services, it could save you a lot of money in the long term.

Don’t make any snap decisions when it comes to borrowing money, think about how much you actually need to borrow and also about your ability to be able to repay the debt in the future. Once you have decided on a particular route, be careful to read all the small print before signing the paperwork, ensuring that you fully understand exactly what you are getting into.

And finally, borrowing money in any way is an expensive thing to do, so if you don’t absolutely need to do it, then don’t borrow!

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How To Avoid Debt Disasters

. :~ ALIVE FUN ARTICALS ~: .

Most of the population of the UK have been in debt at some time or other in their lives, even if they currently don’t have any commitments outstanding. Whether it is in the form of a mortgage or homeowner loan to buy their house, a personal loan to buy things such as a new car, or a credit card for use in emergencies or day to day shopping expenses, the majority of us have experienced being in debt to some degree or other.


But recent surveys have shown that the total level of debt in the UK is growing dramatically, some reports claim that consumer debt on loans and cards is growing at a rate of £1 million every ten minutes and that the average adult in Britain currently has in excess of £30,000 of personal debt (including outstanding balances on homeowner loans and mortgages). So it would appear that we have become a nation of borrowers, with some individuals obviously taking out loans and other credit agreements at an alarming rate.

Whether or not someone is considered as having a large amount of debt is, to a certain degree, relative to their own personal circumstances. This would include taking into account things like the level of earnings that particular person may have, to fund the repayment amounts each month, or what level of assets the person may own which could be used as security against the outstanding loan amount.

For example, if someone was making monthly repayments on a personal loan of £500 perhaps, is this a high amount? Clearly, if the individual in question only has a take home pay of maybe £800 per month, then this is an extremely large amount of personal debt, however if the repayment amount is perhaps only ten per cent of the persons take home pay and they have assets such as a car and a large amount of equity in their home to cover the outstanding loan balance, then the situation doesn’t seem to be quite as serious and the borrower is unlikely to be concerned about the level of debt.

The problem which we are currently facing, due to the credit crunch and the global economic slow down, is that earning levels are not guaranteed and unemployment is on the increase, whilst at the same time assets such as houses in particular are losing value, thereby reducing the level of a homeowners equity.

So, to revisit the example used above in the current economic climate, the borrower with a good income may lose their job, causing problems with having sufficient income to meet the loan repayments, whilst at the same time the equity in their home has been reduced through falling house prices and nobody is prepared to buy the car, as the market is currently flat. This may seem like an extreme demonstration of what can go wrong, but in reality this is just the sort of thing which can and does happen all the time.

In other cases, individuals simply borrow money in order to buy the things which they can not afford. This may start with small purchases on a credit card and rather than paying the balance off in full each month, minimum payments are made, thereby leading to a balance building up quickly.

Before the borrower knows where they are, the card is up to its credit limit. At the same time the same person may have a personal loan to purchase a car and a few store cards for those weekend shopping trips, because you’re not really spending money if you’re putting things on your card…are you???

All of a sudden, this individual finds him or herself with a huge problem. All those small purchases they made on their cards, the odd CD here, a pair of shoes there, have all built up to a level where all their cards are “maxed out” and they have an insurmountable level of debt which they have absolutely no way of being able to repay, in many cases they will struggle to even keep up with the minimum repayment amount each month.

So what is the answer for someone who finds themselves, for whatever reason, in a large amount of debt which they are unable to manage? The first option may be to look for a debt consolidation loan to bring other debts together in one repayment amount with a lower interest rate. This can save a large amount of money in monthly repayment amounts and also ensures that the debt is repaid over a fixed term, rather than making minimum payments which only realistically cover the monthly interest amounts.

Another option for someone with credit card balances is to apply for a zero per cent balance transfer card, which can save interest over a fixed term, but repayments must still be kept up to date. Anyone taking this route must remember that their debts have not gone away, they have simply been moved elsewhere and it is vitally important that additional debt is not run up once again. Cut up any existing credit and store cards and only spend what you can actually afford each month, to avoid falling into the trap again.

For someone who may have fallen behind with their personal loan and credit card repayments and may have outstanding arrears, a debt consolidation loan, or a zero percent credit card may not be an option as these will often not accept anybody with a history of bad credit.

In this case it may be necessary to enter into a debt management scheme. For a monthly fee, a debt management company will deal with all a person’s creditors, negotiating minimal monthly repayment amounts at reduced interest levels and in some cases, getting final settlement figures reduced by lenders.

In exchange for this service, the borrower makes one monthly repayment to the management company, who in turn pay the various creditors. For someone opting for this route, it is unlikely that they will be able to get any further credit on cards or loans until the original scheme has finished and the debt has been repaid. If things are extremely serious and there is no other way out, the final option for someone with debts is bankruptcy, but this is an extreme measure and should be avoided wherever possible.

For someone who may have debts which they are finding quite manageable at the moment, but may be concerned about unforeseen eventualities in the future, such as unemployment, or long term sickness, there are a number of insurance products which can cover loan and other debt repayments and balances.

These include, payment protection insurance (PPI), critical illness cover, permanent health insurance and of course, life cover. These policies all cover different things and one individual policy is probably not adequate to cover every possibility. For anyone who has outstanding personal loans or other debts which are unprotected, the best course of action is to have a meeting with an independent financial adviser (IFA) who can advise you on the various products available and which ones are best suited to meet your specific needs and requirements.

Of course, the best piece of advice with regard to getting into debt is quite simple…don’t do it! Think before you spend money on a credit or store card and ensure that you pay off the full amount of the outstanding balance each month, so that balances do not build up.

Before applying for a personal loan ask yourself if you really need the item in question, do you need to borrow as much as you are intending to, would it be more appropriate to save money over a few months to get the amount you need, can you afford the monthly repayments, not only now, but next year and the year after that and is the loan adequately protected in the event of something unforeseen happening to you?

Remember, every penny you borrow has to be repaid at some time, plus interest and borrowing for short term pleasures and luxuries can mean many years in tough repayments!

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How To Prioritise Your Loan Repayments

. :~ ALIVE FUN ARTICALS ~: .

It is a commonly known fact that the average adult person living in the UK today has a higher level of personal debt through personal loans and credit cards than at any other time previously and the overall level seems to be increasing at an alarming rate.



In many cases, these debts can be spread across a number of different creditors and could include things such as a homeowner loan, or mortgage, a couple of personal loans and maybe three or four different credit cards and store cards. Even when times are good and the economy is strong creating good security for employment prospects, it can be a daunting task managing all the different bills which land on the doorstep each month, ensuring that everything gets paid on time.

But with the onset of the credit crunch and recent slow down in the UK economy leading to recession, and worries over job losses, unemployment and reductions in overtime and bonus payments from employers, large monthly repayments on outstanding loan debts can be a real worry and many people are now changing their attitude towards their personal debt levels and making a serious attempt to reduce their personal loan and credit card balances significantly, or even pay them off completely.

Those individuals who are lucky enough to have sufficient spare cash each month, in many cases are now realising just how vulnerable their situation could be if their income were to stop suddenly and are making extra efforts to clear their outstanding personal loans and credit card debts as quickly as possible, in order to reduce their committed monthly outgoings.

Despite the fact that the base rate of interest on homeowner loans and mortgages has dropped significantly over the past few months, thereby reducing many borrower’s monthly outgoings, this is not the case when it comes to personal loans and credit card rates, which have continued to remain at their previously high levels and with many individuals seeing a drop in their regular income, these are usually the debts which cause the problem with the monthly budget.

When borrowers have several outstanding loans and card balances, it is quite common for them to apply for a debt consolidation loan, which combines all their outstanding debts into one loan with only one monthly payment. Although this can save a great deal of money in monthly payments, allowing a person to have more disposable income each month, in the long term this option can often end up costing the borrower more than their original debts would have done, as usually the payments are spread out over a much longer term, with interest being charged for a longer period and therefore costing more in total, even though the monthly payments are less.

This option is fine for someone who needs to reduce their outgoings each month, but for someone who wants to clear their debts as quickly as possible, it is only extending the repayment period.

So where should a person with a variety of personal loans and cards start when they seriously want to clear their debts?

Firstly, it is important to ensure that each of the creditors receives some level of payment each month, even if this is only the minimum amount, as this ensures a clear credit record for the borrower in the future. The person should then check each one of their credit agreements carefully, whether it is a loan or a credit card, to confirm what the rate of interest being charged is on each debt and whether this interest is added on a daily basis, annually, or all at the outset of the loan.

If a personal loan has had all the interest added at the outset, there is little point in paying this off early unless the loan company offers a discount for early repayment. In some cases a lender will actually charge an additional penalty for repaying a loan early and the borrower should be careful to check the small print to see if this is the case and how long it applies for. If in any doubt, contact the company who provided the loan in the first place.

Assuming that there is no disadvantage to repaying any one particular debt first, typically those commitments which charge the highest rate of interest should be the first ones to be cleared. Under normal circumstances these tend to be store cards, mail order catalogues and credit cards. The rate of interest charged will be shown on the monthly statement.

Where there is more than one interest rate charged, for example on a credit card which charges different rates for purchases, cash advances and balance transfers, the balance which is being charged at the lowest rate is cleared first. This is an important area to note for someone who may be considering a zero per cent balance transfer onto their credit card, if they already have an outstanding balance on the card, charged at a higher rate, none of this debt will be cleared until the interest free element has been fully repaid.

Apart from this trap, balance transfers can be an effective way of reducing interest payments on other debts and clearing them faster, as the full amount of the monthly repayment will be used to clear capital, not interest.

Once credit card balances have been cleared (apart from zero per cent interest elements), the next most expensive form of credit are normally unsecured loans. These may have lower repayment amounts and smaller balances than secured loans and mortgages, but the interest rate charged is usually considerably higher, as this type of loan presents a greater risk for the lender than a secured loan would.

As various outstanding debts are cleared, it is important to redirect the savings made towards the next most expensive loan or credit card, continuing down this route until all debts have been cleared. It may seem like a long way off at first, but it will happen eventually (honest!!) and those individuals who are most focused on channelling funds back into repaying their personal loans will , not surprisingly, be the first ones to become debt free.

If someone is in a situation whereby they can not afford to make all their loan repayments each month, firstly they should contact each of their lenders to arrange reduced repayment levels wherever possible. If this is still not sufficient to manage regular payments, then it makes sense to keep up with the repayments on any secured loans first, as these are the only ones which can cause a person’s home to be repossessed. Any arrears and defaults, should be allowed to build up on unsecured loans and credit cards first, although this should of course be avoided wherever possible.

Finally, if after reading this article, you are in any doubt as to what course of action to take to clear your loans and other debts, there are several services and organisations which are able to offer help and advice on a one to one basis, many of which are free of charge.

Independent financial advisers, debt counsellors, debt management companies can all give advice, but may charge for their service. For general advice on debts charity organisations such as the Citizens Advice Bureau (CAB) can provide an excellent service for no cost. If you are serious about clearing your debts, take some professional advice, develop a repayment plan which is manageable and realistic, write it down and place it somewhere where you will see it every day and then stick to it until you have achieved your goal of becoming debt free.

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Is There An Alternative To A Bank Loan?

. :~ ALIVE FUN ARTICALS ~: .

Over the course of the past eighteen months or so, it seems as though there hasn’t been a day gone by where either a specific bank, or the banking sector as a whole has not been in the news headlines, for a variety of reasons, but all of them bad.


The banking sector is currently in turmoil, as years of greed and irresponsible lending policies have finally taken their toll on the sector, with banks making record losses, being taken over by competitors and receiving billions of pounds worth of government bail outs to help write off bad credit loans.

Due to a lack of liquidity, it has become extremely difficult for an individual to obtain funding through a personal loan or homeowner loan, unless they have a perfect credit rating and even if they are accepted for a loan, despite interest rates being at a record low level, the cost of personal finance seems to have increased dramatically, making a cheap loan seem like a thing of the past.

At the same time as this, interest rates for savers and investors have plummeted and many savers are concerned about just how safe and secure their savings actually are in the bank or building society. It seems hardly surprising therefore, that many people have lost faith in banks, both as savers and borrowers and are now looking for an alternative home for their money, or provider for their next personal loan.

But what are the alternatives to the traditional bank or building society route, for someone who has become disillusioned with the system, or is unable to obtain the loan they require?

Credit Unions

One alternative solution for both savers and those looking for a personal loan is a credit union. Credit unions have been around for many years and operate on the principle of a financial co-operative society, existing for the benefit of members and have been growing in popularity over recent years and particularly since the start of the latest banking crisis.

A credit union is owned solely by its members and run by the same people, all of whom must have something in common with each other, such as all working for the same company, living in the same local area, or being members of another group or organisation. The individual members of the credit union invest their own money in the central fund, along with all the other members, which can then be used to offer cheap loans to other members of the union and offer a better return on an individual’s savings than they would ordinarily receive from a typical bank or building society deposit account. This would be paid to the member in the form of a regular dividend, rather than monthly interest.

For someone looking for a small personal loan, a credit union offers a cheap and flexible alternative to their normal bank. One of the rules of a credit union is that the maximum level of interest which can be charged on a loan to a member is capped at 2 per cent per month, but in many cases the actual rate which is charged is much less than this. Repayments are extremely flexible and a borrower is able to take out a loan for just a few months if they so wish and repay all or part of the outstanding balance at any time without incurring penalties.

The important thing to remember about this type of organisation is that, in order to benefit from it, you have to be a member and the credit union is run solely for the benefit of its members, therefore any profits made are returned to those same members in the form of dividends and lower interest rates on loans, unlike banks which are more interested in generating huge profits for their shareholders, at the cost of the ordinary customers.

With regards to saving through a credit union, this too is extremely flexible. It is possible to deposit a lump sum, or make regular savings amount either by direct debit or directly from salary (particularly in the case of credit unions which are run through employers). The money invested is accessible at any time and it is possible to deposit, or withdraw cash as often as you like. Under current legislation, there is no interest payable on savings within a credit union, but a dividend is paid on a yearly basis, based on the interest charged on the loans made by the union.

Clearly the amount of dividend can vary, depending on term and amount invested, but typically it is the region of between 2 and three per cent, but could realistically be as high as 8 per cent. As from May this year, however, credit unions will have the option of paying interest to their members rather than a dividend.

Whether an individual joins a credit union as a saver or a borrower, they are offered a high level of protection automatically through the organisation. For someone taking out a personal loan, the credit union automatically provides free life insurance to the borrower to cover the outstanding balance of the loan. For savers, it is reassuring to know that all credit unions are covered under the Financial Services Compensation Scheme, which means that a person’s money is protected even if the credit union were to close down.

Credit unions have been around for many years and up until recently have often been thought of as out of date. But due to the recent problems in the banking sector they are starting to grow in popularity once more and the government is now becoming involved, with plans to alter the legislation which regulates credit unions, in order to bring them more up to date and make them more appealing and accessible to a wider range of individuals.

One spokesman for the government said “The excellent service provided by Co-operatives and credit unions take place within an outdated legislative framework and overhauling this will be key to achieving a significant expansion of the sector. I want the sector to thrive and grow further, to be widely seen as a genuine alternative to proprietary companies across the country, not stereotyped as “old fashioned” or confined to its Northern roots. This is a vision of credit unions as the modern day equivalent of 18th century “town banks” providing a local, trusted alternative to the national banks on every high street. To achieve this vision means removing barriers to co-operatives competing fairly in the market place and enabling them to bring a greater range of services to a wider range of people.”

Hopefully, new legislation will bring renewed activity and interest in credit unions and not restrict them by imposing too many prescriptive rulings on their activities. Either way, interest continues to grow in these organisations, both for savings and personal loans and it looks as though they will be here to stay for some time, providing a realistic alternative to the traditional bank.

For more information on credit unions, or to find one in your local area, contact the Association of British Credit Unions Ltd.

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