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| UK debt trends worrying loan and credit card analysts |
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According to research from One Advice, there are over two million people in the
UK who owe over £10,000 on credit cards, or unsecured loans. Of these borrowers,
about half a million owe over £20,000, and a quarter of a million owe £50,000 or
more through unsecured loans.
According to National Savings and
Investments, 39% of Britons overspend on their debit cards on day-to-day
purchases citing the most common reason as, "they feel they are not spending any
money". This is a worrying trend when considered alongside the UK credit card
trade representative, APACS, reports that nearly two thirds of adults have at
least one credit card and that multiple card holding is becoming a growing
phenomenon. Over half of all card holders now hold more than one card, with one
in ten holding at least five.
Chris Holmes, chief executive of One
Advice, said, "It's worrying that so many people owe so much in unsecured debt –
and it seems to be rising. With many unsecured borrowing products having high
interest rates, many people are entrapped in debt. They are often only paying
off the interest accrued every month, as opposed to the capital they have
borrowed. Those caught in this situation need to take action – otherwise they
will fall further into debt"
The survey also reports that the 35 to 44
age group was most vulnerable to running up significant levels of debt, making
up around a third of those owing more than £10,000. 18 to 24 year olds were not
immune however, with one in 20 surveyed already owing over £10,000. With the
retraction of financial support for students, and the introduction of top up
fees, this age group look set for greater susceptibility in the future. Some of
the major banks have started to provide specific student and graduate
banking help to reduce the potential impact on those who choose to take on
further studies, but more looks to be needed.
Due to changes in the law,
the number of bankruptcy declarations has seen significant rises, as people see
it as the only way out of their debt crisis. Creditaction reports that, "the
proportion of bankruptcies among the 18 to 29-age group has more than doubled in
the last 4 years."
Chris Holmes said, "Those worrying about their
finances should seek professional advice as taking out the wrong debt solution
could make matters worse. Indeed, bankruptcy can sometimes appear to be the easy
way out for people with serious financial problems, but there are difficulties
associated with this that can remain for some time. Indeed, bankruptcy stays on
your credit file for six years which can affect your ability to get a mortgage
and credit, and you will pay higher interest rates. In some cases, it can also
have an adverse effect when applying for jobs."
Another recent trend,
fostered by wide scale advertising, is towards debt consolidation loans in an
effort to make loan repayments easier to keep track of. However, Richard Brown,
Chief Executive Officer of Moneynet, has warned that
people should, "Think carefully before consolidating their debts, this can prove
to be a lifesaver for many people. Amalgamating all credit card, store card and
personal loan debt into one can make the payments more manageable. However, once
this has been done it is often sensible to destroy existing credit cards and
avoid the temptation of running up further debt until the loan is
repaid".
Disclaimer:
All information contained in this article, is for
general information purposes only and should not be construed as advice under
the Financial Services Act 1986.
You are strongly advised to take
appropriate professional and legal advice before entering into any binding
contracts.
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