Personal Debt

Is there a solution left to address rising personal debt in Britain and avoid folks going bankrupt

After so many years in financial services I have noted that certain types of business come all at the same time. For instance a couple of years ago we had 10 divorcees remortgaging in order to meet their divorce settlement. They all came in a normal working week. Another time it was the turn of First Time Buyers to flock in virtually all at the same time. On neither occasion had we advertised or run a marketing programme for such groups. But it was all good and pleassant business.

In the past ten days however we have been flooded with requests from people sinking under the burden of debt and falling in arrears with their payments. As it happens this coincided with an announcement by The Royal Bank of Scotland that they had noticed a great number of their credit card clients falling behind on their payments too. Is this the begining we have been dreading or is it just another bleep? I do not know the answers to these questions but I do know that there is a common theme among those all who have come to us to be saved from calamity - their trouble started after falling sick or being temporarily out of work at one time or another. None had any Mortgage Payment Protection Insurance also known as Accident, Sickness and Unemployment.

There may be a number of reasons why they did not have such insurance in the first place but lets hope it was not because their broker at the time could not be bothered to recommend such product because the commission earned was too menial.

Had the fitter in Liverpool or the IT manager paid such policy they would have had their mortgage paid for at least a year whilst they were sick and out of work respectively. Instead they now have to find a drastic solution to the threat of eviction from their respective lender.

At The Mortgage Explorer we propose to all our mortgage clients a protection plan which if affordable will consist of:

a.Life Cover which will pay the mortgage off through a lump sum in the event of death. This will commence at the Exchange of Contracts in case of purchase or upon completion of a remortgage.

b.Critical Illness Cover which will pay the mortgage off through a lump sum in the event of incurring a specified critical illness. Date of commencement same as the life cover.

c.Mortage Payment Premium Payment or Accident Sickness Unemployment with a minimum deferred period and paying out for at least a year.

d.Private Medical Care which can help in expediting recovery through not having to be on a waiting list. It may be helpful to have paid off the mortgage through the critical illness plan but in addition it will be even better if one can expect quicker treatment through a Private Medical Care policy. This plan would commence at the same time as the life cover plan.

e.Income Protection Plan which will replace a proportion of the income in the event of illness. This payment can last till retirement and can complement the Accident Sickness and Unemployment Plan in so far as the Income Protection plan deferred period would be for a year. The reason being that premiums of such plan can be minimised by having a longer deferred period.

There is a school of thought that would prefer to use solely an Income Protection plan with a very short deferred period say a week instead of using an Accident Sickness and Unemployment plan but cost may be prohibitive and in addition Income Protection do not cover unemployment. The good broker will have worked out the proper combination for the applicant.

These plans cost money but they go a long way in protecting your largest single purchase from being repossessed.