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Debt Busting with Liam Croke

Thursday, 13 May 2010

You only have to look at the news or read the papers to see headlines describing redundancies, mortgage arrears and an increase in social welfare payments.
Many people are struggling with their loan repayments and debt management and they are not alone as people throughout the country deal with a reduction in their income.
For the next two weeks Liam is going to do two intensive debt busting sessions, dealing with everything you need to know about debt management, budgeting, increasing your income and decreasing your expenditure.

Liam will be answering your questions so get in touch by phoning us on 1850 71 71 11 or emailing the afternoon show

Liam Croke: Money Expert

Liam has worked in the financial services industry for the past 21 years and seen by many as an expert in the field of personal finance. He is a qualified financial and mortgage advisor.
In the past he has held senior management positions with two well known financial institutions along with one of the "top 5" accountancy practices in Ireland.

Liam gives his advice and wisdom on a daily basis to those who are just starting out to high net worth individuals. He currently works for a financial services company based in Limerick.
He is frequently asked to contribute and comment in all areas relating to personal finance on both national and local radio stations. You will have heard him for example recently on RTE's "The Mooney Show" and on Newstalk's "The Right Hook."
Liam was invited to make a presentation to the Joint Oireachtas Committee on Social & Family Affairs on trends and levels of personal debt in Ireland. He made his presentation to the committee on the 24th June 2009.

Liam is author of 4 personal finance books:
. The best selling The Mortgage Maze Explained published by Currach Press in 2006.
. The best selling book Your Money Your Life - Managing your finances in today's Ireland published in 2007.
. I'm Broke! A teenagers guide to Money - Published by Crabtree and distributed in the UK & USA in 2009
. Stash or Splash which is being released in Ireland and the UK in September of this year.
. Liam previously wrote a weekly personal finance column for The Sunday World entitled Mr. Cash - How to Save it, Spend it, Earn it and has also written articles f or the Sunday Business Post, the Evening Echo, the Sunday Independent, the Irish Sun, Prudence Magazine to mention just a few.

Liam Croke: Debt Busting Advice Week One

Positive action!

Face the problem head on and take action to reduce the debt and relieve some of the pressure.

Stop Borrowing any more money

This does not mean that you simply stop going to your local bank or credit union for top up loans. It means removing what credit you currently have at your disposable i.e. your credit card, your large overdraft that you constantly are in. Remove that temptation to use them now and cut up your credit card, reduce your overdraft limit etc.

. Make a commitment
. Assess the situation.
. List and evaluate your debts.
. Divide them into priority debts and secondary debts.

Before you can decide on a particular course of action you have to know what you are up against.

List of all your debts, how much is owing, how much you pay each month, who you owe it to, what interest rate you are being charged for each debt and how many years remain before the loan is cleared off in full.

Here's an example of what you may be looking at:

Lender: Credit Union
Amount Outstanding:€7,200
Monthly Repayment: €120
Time Remaining: 5 years

Lender: Credit Card
Purpose: Visa
Amount Outstanding: €10,000
Monthly Repayment:
Time Remaining: Open ended

Purpose: Car
Amount Outstanding: €23,500
Monthly Repayment: €651
Time Remaining: 3 years

Purpose: Personal Loan
Amount Outstanding: €3,400
Monthly Repayment: €156
Time Remaining: 2 years

Lender: Bank
Purpose: Mortgage
Amount Outstanding: €220,000
Monthly Repayment: €1,051
Time Remaining: 35 years

So, you can see from the above that almost €2,300 each month is going towards servicing your short and long term debt. This amount of money therefore is not yours to spend when you get paid each month
So, now you know how much is outstanding altogether and how much of your income is going towards servicing these debts.

It also helps to divide them into Priority Debts and Secondary debts:

Priority Debts:
. Home
. Electricity, Gas, Phone
. Fine or Civil debt
. Goods on hire

Secondary Debts: (no security against them)
. Overdrafts
. Credit Card
. Credit Sales Agreements
. Personal Debts
. Personal Loans


The next thing you do is write down what your total net monthly income is. Include every
source of income from your PAYE income to maybe what your monthly children's
allowance is.
Make a plan of the money you expect to receive and how you expect to spend it.

By accurately comparing what is coming in and going out you budget how much you can afford to pay towards your debt.
. Income
. Spending
. Money left over

. Wages after tax
. Tax allowances
. Social welfare / child benefits
. Household Contributions
. Other entitlements

This is a personal budget reflecting your situation; remember to include all expenses big and small to make an accurate assessment of your finances.

. Mortgage
. Rent
. Housekeeping
. Gas and Electricity
. TV License
. Hire Purchase
. Loans
. Clothing
. Phone

Now it's time to look at the how much money you are left with when you take your spending from your income. This is money that can go towards your debts.

Make contact with people that you owe money to.
You need to start talking with the companies/banks you owe the money to and advise then of your current predicament, remember honesty is the best policy and lenders will respond to you and will want to work with you. You can come to some form of agreement that is acceptable to all concerned whereby they may offer interest only repayments for a time, suspend repayments for a few months, reduce your monthly repayment by extending the term remaining on the loan. If you are not confident enough to speak to your creditors yourself then ask someone like MABS to act on your behalf.

When an agreement is reached with a lender, remember to stick to your side of the agreed plan and do not miss any of the revised repayments.

Letter to Lender
Re: Croke Loan Account Number 12345678
. Amount borrowed
. Current loan rate & repayments
. Amount in arrears
. Reasons for financial difficulty
. Positive action taken to date
. Household Budget
. Payment reduction sought

This is best through a letter or email, make sure that you keep a copy for yourself.
Now you can see exactly how much money you have to repay your debts and you can renegotiate your loan payments (tips on best way to do this, what information do you need for your lender)
Make a spending diary this week to see exactly where your money is been spent.

Example letter:

Mr. Liam Croke
The Afternoon Show
Dublin 2.
Ms. Maura Derane,
Lending Manager,
Mortgage Bank Limited,
Stephens Green,
Dublin 1.
Tuesday, 11 May 2010

Dear Ms. Derrane,

Re: Croke Loan Account Number 12345678

My wife and I borrowed €5,000 from Mortgage Bank Limited on the 12th June 2006.

We have a variable rate loan and our current repayment each month is €350.
Up until November of last year we have been making our regular monthly repayment on time with the exception of the November payment. So we are currently one month in arrears on our loan with you.
Our current problem is that whilst we are not in a position, at present, to repay the arrears in full we are worried that our arrears may grow even further in the coming months.

There has been a ban on overtime at my workplace and my husband has recently lost his job due to the downturn in the economy where he was employed in the retail sector so we are experiencing terrible difficulty in meeting all of our financial commitments. For example, overtime usually accounts for an extra €300 each week in my pay packet which is now not there.
My husband is actively looking for any form of work at the moment and he has applied for welfare benefit but we were told that this might take 7 or 8 weeks before it is processed.
We have completed and income and expenditure analysis of our current income each month and what we spend our money on. You will see that there is a shortfall of €x each month. We have cut back on what we spend each month on for example fuel, lunches, phones and so on but still there is more going out than coming in each month despite our best efforts to reduce our outgoings.

In the circumstances, we are looking to see if you could reduce our monthly repayment each month to €150 per month for 6 months which is an amount we know we can repay confidently and on time each month.
This will give us the breathing space required for my husband to hopefully gain other employment in that time period. We would hope to then catch up on the arrears outstanding by increasing our repayments from May of next year or earlier if possible.

I have been advised that there may be other options open to us such as interest only repayments or extending the term of our loan and we are open to exploring what alternatives you might be able to present to us that we are both happy with.
Thank you for considering our request. If you would like any more information about our finances, please do not hesitate to call me or my husband at home any evening after 5.30pm.
Thank you for your assistance and we look forward to hearing from you as soon as possible.

Yours faithfully,

Liam & Roseann Croke

Your one-month financial record:

Next week we are going to look at how you can increase your income and reduce your expenditure and Liam will be taking your calls and answering your questions.
Liam will be answering your questions so get in touch with us by calling the low call number 1850 71 71 11 or send us an email:
For more information please contact: (Money Advice and Budgeting Services) (Free Legal Advice Centre)