Canadian Debt Consolidation
Life throws people a number of challenges often on a daily basis and unfortunately, some of those are financial challenges. The loss of a job, an illness and many other situations can make paying off loans difficult to do. Sometimes people simply...
Consolidation debt to help get you out of the quagmire
Will you agree with me if I tell you that, the key to financial success is to live within your means? This is an old belief that modern day income earners have completely forgotten. This is because it is now extremely easy to get into financial...
Individual Voluntary Arrangements (IVA): The New Debt Solution?
The UK is facing a debt crisis fuelled by over spending and over borrowing. In June of this year personal debt in the UK broke through the £1.1 trillion barrier and Britain’s personal debt is reported to be rising by £1 million every 4 minutes. ...
Personal finance - have consumers had a belly full of personal debt?
For months, we were trigger-swipe happy, putting our groceries, clothes, holidays and service charges on our credit cards. We wanted mortgages, we took out loans, we watched Property Ladder and What Not To Wear. Whether you were born middle class,...
Working Toward a Debt-Free Lifestyle
As debt becomes a greater factor in the day-to-day life of more
people, many wish that they could arrange their lives so as to
completely eliminate their personal debts. Though it may seem
like little more than a pipe dream, it actually is...
The Effects of Consumer Debt
Consumer Borrowing
Consumer borrowing in the UK has now crashed through the £1 trillion barrier. 80% of this is due to credit card borrowing, loans and mortgages. How are people managing to handle their debt and what effect is debt having on families today?
The National Consumer Council reports that 6 million families in the UK are already struggling to make repayments towards their debt, and Citizens Advice reports that over the last 6 years, they have seen a 44% increase in the number of people seeking debt advice. This may be just the tip of the iceberg. There must be many families in the UK who have debt problems, but are not aware of the free help and advice available.
Tackling Debt
According to a DTI survey carried out in 2002, a household is likely to be over-indebted if:
25% of your annual income is spent on repaying Creditors
50% of your annual income is spent on repaying credit and mortgages
You have 4 or more companies that you owe money to.
People find it difficult to make repayments for a number of reasons. Generally, the underlying cause is some kind of change in personal circumstances such as job loss, divorce, illness or a new baby. In these instances some people may resort to more borrowing in order to pay creditors or household bills. This is not always the best option.
Effects of Over-Indebtedness
The personal effect of struggling to repay debt can be far reaching. Sometimes a lack of financial awareness can lead to stress, depression, anxiety, mental health problems, relationship breakdown and even suicide.
Raising Financial Awareness
The Government recognise the need to raise financial awareness amongst the general public. The financial cost of debt is
not only on an individual level, but there is also a cost to society in general.
People who experience stress due to their situation, will probably seek advice from their GP and may take time off work, therefore, this has an effect on already hard-pressed NHS and productivity due to absenteeism.
People who have had homes repossessed need to be re-housed, generally by the local Council. Those who seek legal aid due to debt issues also incur a cost to the taxpayer.
The Solution before the Problem
Will raising financial awareness alone tackle the issues of debt problems? It helps for people who are already struggling with debt, but are there other areas the Government should be looking at?
If you pay your creditors on time, regardless of what it takes to pay them, you are classed as a good payer and therefore, not a risk when it comes to additional borrowing. In fact, your finances could be in turmoil and you could be taking money from one card to pay another but you may still obtain even more credit.
The freedom creditors have to advertise loans, credit cards and mortgages could be challenged as well as how decisions are made regarding lending.
If people, who are currently in financial difficulty, find they cannot borrow more money, they should be made aware of the free financial advice that is available. Free Debt Management Companies such as Payplan, www.payplan.com, can negotiate repayments with creditors so that monthly payments are reduced and become more manageable.
Nicola Bullimore has been working with people to resolve debt problems for a number of years. For more information regarding debt issues, please visit www.debtquestions.co.uk.