Money is a bit tight for most of us right now.

It’s especially hard if you have a family to take care of.

The dramatic impact of the economic squeeze on ordinary families is shown by the fact that more than 4 million families have used a credit card to pay their mortgage or rent in the last year.

This worrying trend was something we first mentioned last year when we asked Is your credit card paying your mortgage?

How bad is the situation?

The disturbing level of desperation on the part of many homeowners is shown in a report from the homeless charity Shelter, which lists a number of alarming statistics showing the gloom that is gathering around everyone’s household finances:

• Growing numbers of you have taken to paying off your debts by withdrawing cash on your credit card. This is probably the most expensive way possible as this type of transaction carries an interest rate of 28%.
• 1 in 6 of you fears losing your home after failing to keep up with payments.
• 3 million of you with families have had to borrow money from friends or relatives, or take out a personal loan, just to pay your mortgage or the rent.
• 1 in 4 of you with families say that difficulties meeting your monthly housing costs is causing you stress or depression.
• Nearly 400,00 of you with families say you have fallen behind with your mortgage or rent payments.
• Nearly 2.2 million of you spend more than 50% of your income on your housing costs.
• 25% of you are now spending less on food.
• 1 in 9 of you has sold possessions to help pay the bills.

A serious struggle

The report carried out by Shelter (called ‘Breaking Point’ ) surveyed people from all backgrounds and levels of affluence.

Experts described Shelter’s findings as 'stark' and said it showed how finding the money to keep a roof over their head was becoming a serious struggle for many people.

It was also revealed that 1 in 10 of you has taken on another job or is working overtime because your main job does not pay enough money to keep your finances afloat.

Some of you said you had cut the amount you spend on buying clothes for your children. 

Nearly 15 % of those surveyed, said they were living in a home which is 'too small for their needs'.  The same amount said that  the money for essential repairs to their home. 

If you are already in debt and are having problems keeping up your payments, then you should speak to a debt specialist who can help.

Adam Sampson, chief executive of Shelter, said:

'Our report shows just how difficult it is for ordinary people to cope with spiraling housing costs, and how desperately unaffordable housing has become.

'People are going to extraordinary lengths to ensure they pay their rent or mortgage, but the affects of stress or depression, having to sell possessions or deprive the kids of treats can be devastating to family life.' 

A separate survey, from the credit firm Equifax, said about 20% of you owning a home are worried about having your homes repossessed.  The number of victims of repossession this year is expected to jump to 125 a day, compared with 75 a day in 2007.

Worried about repossession? Read our 10 steps to lower your risk of repossession

Housing Minister Caroline Flint said:

'We are taking action to support families who may be facing difficulty because of current market conditions, with £9million more for face to face debt advice, and free legal advice to all households at risk of repossession.' 

So, it’s clear that times are hard for a number of us. And though the credit crunch looks set to roll on for a while, there are things that you can do to help yourself.

If you are struggling with your some of the things mentioned above then firstly, do not panic. There is advice and support from a number of organizations:

The Consumer Credit Counselling Service (CCCS) is a debt advice charity that offers free and impartial advice. Their helpline is open from 8am to 8pm, Monday to Friday, on 0800 138 1111.

Credit Action also offers impartial and ethical advice about all things debt related.

You can also contact the National Debtline and your local Citizen's Advice Bureau.

Secondly, if things are really tough and you don’t feel there is anyone you can really talk to, remember you are not on your own.

Call the Samaritans on 08457 90 90 90 in the UK & Northern Ireland or 1850 60 90 90 in the Republic of Ireland.

Thirdly, speak free of charge to a debt adviser who can provide you with advice and solutions to help you resolve your debt and credit problems.

Related stories

Debt a reality for growing numbers of us

10 tips that will make sure you stay broke

If you've ever taken out a loan, mortgage, credit card or store card, or bought something on credit, then the chances are you were sold payment protection insurance (PPI) at the same time.

Now, the consumer association Which? believes that thousands, even millions of you, may have been mis-sold PPI.

The scale of the mis-selling of loan payment protection insurance is greater than previously thought, with up to 2 million policies sold to people who may never be able to make a claim, according to Which?

Which? say that up to 30% of you taking out insurance on a loan in the last 5 years may fall foul of exclusions that would prevent you claiming.

• What is PPI?

PPI is designed to cover your debt repayments if you can't work through illness or accident, or if you are made redundant.

 

Unfortunately it is often mis-sold, costing many of us thousands of pounds for expensive insurance we may never actually be able to claim on!

Which? has been speaking out about the mis-selling of PPI for many years, but now the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) are getting involved.

• Poor selling of PPI

The FSA has already designated the insurance a priority because of the potential risks to consumers, and has fined or censured a string of companies over poor selling practices.

 

The findings by Which? are revealed just days before what is expected to be a highly critical report from the Competition Commission on, which has been investigating the £5 billion a year industry and is likely to announce plans for a crackdown on the way the policies are sold. It could even call for them to be sold separately.

Which? surveyed people who had taken out a loan or mortgage during the past five years and found that 32% of those who signed up for the insurance may fall foul of one or more of the "significant exclusions" in the small print. That could amount to between 1.7 million and 2.1 million policies.

The research also found that the average loan is £6,050; 1 in 10 of us has borrowed £10,000 or more.

A Which? spokesman commented on their survey:

"People who are self-employed or on a fixed-term job contract, for example, often aren't covered by PPI. Nor are many people aged 65 and over, or people who might claim for absences relating to pre-existing medical conditions."

Doug Taylor, Which? personal finance campaigner, said:

"We've always known that people were being mis-sold [payment protection insurance], but we were still amazed to discover the scale of it. It appears that salespeople are chasing their commissions, while their bosses are chasing profits. Where's the sense of responsibility to the customer?".

He said if someone with a loan or mortgage thought they might have been mis-sold the insurance: "nows the time to fight back".

 

Many people may not be aware that policies only pay out for a limited amount of time, often 12 months, and that credit card and store card insurance frequently covers only the minimum monthly payment.

So, if you think you have been mis sold PPI, then you need to claim it back.

Claim back your Payment Protection Insurance

Claim back your bank penalty charges

Claim back your credit card fees

Claim back your mortgage exit fees

We may not always be terribly concerned with the amount of spending we do on our plastic cards, but it appears we are getting far too slack about our credit card and debit card security.

A survey of 4,000 members of the consumer association Which? found that nearly 50% use just one PIN for all their cards. And over half used their mother's maiden name as a security password.

Which? said those of us that did this, were failing to take basic security precautions when using our credit cards and debit cards in shops or on the internet. They also pointed out that half the people in their survey didn't even bother checking that a website was secure before buying their items online!

That's not an especially bright thing; after all there are all kinds of dodgy sites on the internet.

Martyn Hocking, editor of Which? Money commented on their findings:

"There's a lot more people can do to prevent fraud occurring. Shredding documents and checking your bank statements are a good start, but people need to be wise to basic fraud risks such as using their mother's maiden name as a password, or shopping on websites that aren't secure."

Many financial organisations and websites invite you to register using your mother's maiden name as a possible password. And many people find it hard to remember more than one or two PIN. But Which? say this level of security is just not good enough as a spokesman said:

"If someone wants to steal your identity it can be possible to discover your mother's name before she got married. And using just one PIN for several cards obviously exposes you if you have the details of any card stolen from you."

Over the last few years, there has been a big focus on preventing ID fraud and people have been warned about protecting personal data, as well as passwords and PINs.

The Which? survey suggests that at least part of that message is getting through, especially as over 30% of people in the survey had suffered some theft from their bank accounts or credit cards.

But most claimed they tried to shield their PIN when using a public ATM in public, checked their account statements for dodgy transactions, and tore up or shredded statements so the information on them would be useless if stolen.

So, would you say you are up on your credit card protection or are you a credit card security slacker?

Related stories:

Unlucky 13 risks to your online shopping

Chip and PIN saves the day

It was probably on a question of time before we saw this sort of thing happening.

There has been a big rise in the number of banks that are trying to secure loans and credit card debt against borrowers' properties.

The number of lenders seeking court orders to secure personal debt against property reached 131,644 last year; that's a 42% rise year-on-year. Unfortunately this trend is yet another sign of the pressures many of you with debt are now facing.

Mark Sands of the accountants KPMG said:

"You take on an unsecured loan or credit card, you fall into arrears, the bank decides to take you to court, and if you still don't pay you end up with a charge imposed on your house by the court. Lenders are looking at all options to get their money back."

While the applications for "charging orders" have increased 42% over a year, the growth over two years (2005-2007) is nearer to 100%.

• What are charging orders?

Charging orders are effectively a second mortgage on your home and give your creditors security for their loans if they find you are having trouble repaying the money.

 

John Fairhurst of the debt advisory company Payplan; said:

"Lenders are worried about people's ability to repay and a charging order gives a guarantee to the lender that at some point in the future they will get their money back. A charge on a home does not immediately compel the debtor to sell their property and the lender usually hopes to be repaid when a home is eventually sold by the borrower.

"What's quite difficult for a creditor to do is to follow that [charging order] through to repossess the house; repossessions as a result of charging orders are extremely rare."

If you are having debt trouble and are having problems making your repayments, you should speak free of charge to a debt adviser who can provide you with advice and solutions to help you resolve your debt and credit problems.

 

Also if you are struggling with your finances then do not panic. You can seek advice and support from these organisations:

Consumer Credit Counselling Service

National Debtline

Citizen's Advice Bureau

Samaritans

Related stories:

The Top 10 most "in debt" towns

Has your debt reached £25,000?

These days, with credit becoming harder to get and more expensive to repay, the idea of staying loyal to the lenders who already supply you with credit cards, loans and mortgages can seem absurd; after all if there are better deals out there, why not go for them?

But before you launch on an epic quest for the best available credit, you need to know how being a credit tart* can damage your finances; and leave you with more problems than you had when you started!

(* Credit tart refers to those of us who move a debt onto an interest free credit card, move it again when the introductory offer expires and never pay any interest).

• Danger 1: Applying for credit at random

You might think it's better to submit multiple applications for credit as that way you'll see what you qualify for and can compare real-life deals, instead of spending time on doing research.

Unfortunately, there are no short cuts and you will end up with "footprints" all over your credit history. These are the records of searches made by lenders in response to a full application and they stay on your record for the next year. When other lenders see them they may think you are desperate for money or even that a fraud is being planned; and your credit rating will suffer.

It's better to check out personal finance and price comparison websites, the personal finance pages of the papers and specialist magazines before you make any enquiries. When you do approach a lender, be sure to make it clear that you only want a quotation which will not leave a footprint on your credit report!

• Danger 2: Shifting from credit card to credit card

Interest-free periods on balance transfers and 0% on new purchases for a limited period can offer a respite if you're hard-pressed for money but there's no such thing as a free lunch...or a risk-free credit deal!.

Watch out for fees for balance transfers; somewhere between 2% and 5 % is normal. You should also read the small print carefully. Any repayments you do make will almost certainly come off new spending first; leaving the debt you transferred to mount up even more rapidly.

Instead, you should use the interest-free period to repay as much of your outstanding balance as possible; that way you really will save money.

• Danger 3: Forgetting when an interest-free period comes to an end

Many retailers offer a year or more interest-free on major purchases, such as furniture and white goods. Take advantage of these offers but always remember that you eventually have to repay what you owe or you could end up racking up massive interest (30% or more is common!).

The same warning applies to loans taken out as special offers. For example banks often run loan sales to coincide with the High Street sales after Christmas and in the summer. The headline interest rate may be 2% off but it will almost certainly rise after an introductory period.

During the interest-free or low-interest period, aim to save as much as possible of the total you owe. Put it into a high interest ISA and you could even end up making a profit on the deal (which is nice!)

If you can't put aside enough to wipe out the debt when it becomes due, knock off as much as you can when the repayment freeze ends and take out a cheaper loan to repay the rest. You could easily halve the interest repayments this way and clear your debt more quickly.

Danger 4: Remortgaging or extending a loan

This can be a way out of cash-flow problems but, like all credit deals, it can have a downside.

In this case, it's simple; although you have liberated some cash and negotiated cheaper monthly repayments, you'll be paying off your borrowings for much longer. In other words, you're swapping a short-term benefit for years more debt, which will, inevitably, cost you more in the long term.

If you think this is a good way out, be sure to compare deals and look for one that does not carry stiff early repayment penalties, so that you can increase your repayments when your financial situation eases or take advantage of a windfall, such as an inheritance, to pay off the loan totally.

• How you can get it right!

Your first port of call when you want to get a new credit deal is your credit report. This is the history of your credit commitments, such as loans, credit cards and mortgages.

It includes your repayment history, list all the searches lenders have made in response to applications in the last 12 months and features information such as county court judgments (CCJs) against you and whether you have been bankrupt or taken out an individual voluntary agreement (IVA) over the past 6 years.

It gives you the bigger picture of your overall borrowings and how well you are managing them, so you can easily see whether you can afford more credit or whether you need to tighten your belt and repay more of what you already owe.

Because lenders check it whenever you apply to them, it is crucial that your credit report is up to date and accurately reflects your circumstances, so you should check it regularly.

Look for misunderstandings, such as full searches leaving footprints when you only wanted information, and contact the relevant lenders to sort them out.

Generally, a credit report that shows you are not over-stretched and make your repayments on time and in full helps you to get better deals, so you may decide to work on improving it before you apply for more credit.

You can see your Experian credit report for free with a 30-day trial of CreditExpert, the UK's leading online credit monitoring and identity fraud protection service.

© Experian 2008

Related stories:

Image concious Brits ignore credit crisis