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A debt calculator is a quick and easy way of working out if you qualify for a debt management plan, trust deed or bankruptcy.
The trouble is the figures do not always add up if you don’t know some of the technical terms or how to work out what information to include.
Anyone can punch their personal figures in to an online debt calculator - but beware of the results.
A ‘debt calculator UK’ may give a different result from a ‘debt calculator Scotland’ because some of the rules and legal terms are different.
Working out the debt calculator figures
Here’s how to work out the important figures:
How many firms do you owe money?
The answer depends on the type of debt - secured debt is tied to your home, like a mortgage, while unsecured debt is not - these borrowings tend to be credit cards, overdrafts, store cards, catalogue accounts and personal loans.
The answer is the number of unsecured lenders you owe money.
What is your monthly disposable income?
Interested parties have agreed with lenders guidelines on how to calculate disposable income, which is the money you have left after paying your priority bills, like the rent or mortgage, utilities, council tax and day to day living costs. Priority bills also include tax and court fines.
Add these totals and take them away from the money coming in each month to leave your disposable income.
Do you think you can pay your debts in a reasonable time?
That’s not a helpful question if you do not know how long a reasonable time is likely to be. The response depends on how much disposable income you have - if it’s less than the minimum repayments on the account, then the answer is ‘no’.
Who should use a debt calculator?
No hard and fast rules say who can use a debt calculator - it’s a good general financial indicator for most people.
If you are struggling to pay your bills and want some idea of whether a trust deed or sequestration (bankruptcy) are options for you, then check out your status.
You should also discuss your finances with a debt adviser who can explain the various debt solutions to you and how they match your personal financial circumstances. Even if the figures show you qualify for bankruptcy, this is not necessarily the best and only choice to sort out your finances.
Debt calculator advantages
If you are worried about your finances and just want to check out your options, then a calculator is a good way of assessing your options.
Another reason for trying out a calculator is anonymity. You can test out various scenarios in private to give an idea of how your finances will hold up if interest rates change or your income goes down.
Don’t forget that a debt calculator is just a tool that gives a general indication of your money problems - it’s not something that should ever replace direct and personal advice tailored to your personal financial circumstances by a professional adviser.
HJS Recovery helped me sort out my crippling debt problems with both professionalism and kindness. Never judgemental, they agreed a repayment with my creditors that I could afford and now I am completely debt free.
Mr B from Bournemouth
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Registered in England No. OC364606
