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 can negotiate repayments with creditors so that monthly payments are reduced and become more manageable.

Nicola Bullimore has been working with people who have debt problems for a number of years. For more information regarding debt issues, please visit our Debt Questions website.

---

Debt Relief -- Why Most Programs Have A 75% Failure Rate

Debt consolidation, equity loans, credit counseling, debt management plans, even... Read More

The Human Side - Debt Stress

In all the technical discussion you hear about credit... Read More

Debt Settlement : What You Need To Know

Debt Settlement companies work with your creditors to help you... Read More

What You Should Know About Bankruptcy

Filing bankruptcy is not only a last resort legal action;... Read More

The Five Most Popular Questions About Bankruptcy

WILL MY CREDITORS STOP HARASSING ME?Yes, they will! By law,... Read More

Credit Repair - Understanding The Basics

What is Credit?Credit means that you are using someone else's... Read More

What Does A Bankruptcy Trustee Do?

Once you file bankruptcy a court appointed bankruptcy trustee will... Read More

New Bankruptcy Legislation May Make it Harder to Find an Attorney

The recently passed Bankruptcy Abuse prevention and Consumer Protection Act... Read More

British Families and Debt

There is current concern from the Bank of England that... Read More

New Bankruptcy Law ? Where?s the Consumer Protection?

On April 20, 2005, President Bush signed into law the... Read More

Purchase Your Future Now While It Is Still Inexpensive

Leaving school, getting a new job, or even a raise... Read More

Debt Free and Carefree

Are you still clearing a mountain of debt amassed last... Read More

Bankruptcy Your Best Bet?

Filing bankruptcy is a common practice among the U.S. Over... Read More

How Do I Lower My Debt Burdens?

How do I lower my debts?There are several ways of... Read More

Credit Card Debt Elimination

Credit card debt elimination can be done with a good... Read More

Getting Past The Idea Of Budgeting & Saving Money

I'm sure you'll agree that budgeting, saving money, and eliminating... Read More

Get Debt Free

If you once have been caught in the debt trap,... Read More

Is There Any Way To Get Out Of Debt?

In this era where we are bombarded daily with commercials... Read More

The 5 Secrets to Getting Out of Debt Fast

As they stare down at a teetering pile of bills,... Read More

Drowning in Debt? Tips and Tricks for Getting Out of Hot Water with Creditors

Do you, like millions of other Americans, feel like you're... Read More

You Can Make Financial Resolutions Anytime

The New Year often brings with it a desire to... Read More

New Bankruptcy Law ? Five Essential Things to Know

Last April, Congress passed the Bankruptcy Abuse and Consumer Protection... Read More

Start Small and Your Wealth Will Get Bigger

We've all heard the phrase, "You have to start somewhere."... Read More

Debt Consolidation and Personal Finances: Learn the Truth!

An inability to manage credit, growing debt and bankruptcy are... Read More

How to Get Money When You Are Broke

(Money You Don't Have to Pay Back) 1. One way... Read More

Secrets to Why Debt Reduction is So Vital for Your Financial Health

Living with debt is never a good idea if you... Read More

Solutions to Single Mothers in Debt

As a single mother, lets admit it, times get tough.... Read More

The Effects of Consumer Debt

Consumer Borrowing Consumer borrowing in the UK has now crashed... Read More

Reducing Debt Before Its Too Late - How to Avoid the Pitfalls of Creeping Debt

Reducing debt usually isn't a high priority for people until... Read More

Individual Voluntary Arrangements- A New Alternative to Bankruptcy

This May, the Department of Trade and Industry in the... Read More

How to Negotiate Debt Settlement

People over extend themselves financially as a result of a... Read More

Senate Passes New Bankruptcy Law

The United States Senate passed a law on March 10,... Read More

Deal with All Your Debts with Care!

Lots of people take a large ammount of loans and... Read More