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.

---

Fast Track Out of Debt

You go to the mail box and scan - a... Read More

The Human Side - Debt Stress

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

Whatever You Do....Dont Save Money!

No, that's not a misprint. Even though falling interest rates... Read More

Bank Like a Banker

The business of banking has changed dramatically over the last... Read More

Bankruptcy - Your Fresh Start

Most American consumers are living too close to the edge.... Read More

Slowing Spending - The Key To Your Debt Plans Success

Anyone who embarks on a debt reduction program should know... Read More

Use A Debt Checklist To Examine Where You Are

A Debt Checklist allows you to look at items and... Read More

Save Money When Going Out

It seems as though whenever we go out for the... Read More

Help for the Single Mother with Managing Credit and Debt

Today's consumers benefit drastically from the usefulness of credit. Credit... Read More

What Is A FICO Score?

Your FICO score or credit score as it's commonly called... Read More

Bankruptcy: Who is to Blame?

If you are considering bankruptcy as a solution to your... Read More

How to Negotiate Debt Settlements

Knowing how to negotiate debt settlements is the key to... Read More

Corporate Debt Management ? Perspective on the Why

Entrepreneurs have a tough time in their formative years. They... Read More

Credit Counseling ? Signs That You May Need Help

Credit counseling is a viable option for those who are... Read More

Free Quick and Easy Money Saving Tips ? Part 2

Although many consumers would argue differently saving money doesn't have... Read More

Bouncing Back from a CCJ

Should you be unfortunate enough to face a CCJ ?... 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

The Last Debt Solution Should Be Bankruptcy

A debt solution like bankruptcy should really only be used... Read More

Tips To Take Control Of Debt Collection

Yes, debt collection tips can help. You may think you... Read More

Top Ten Reasons People File for Bankruptcy

1. Eliminate the legal obligation to pay many of your... Read More

What is Debt Settlement?

Debt settlement is the process of negotiating with your creditors... Read More

Learn The Five Key Debt Reduction Steps You Must Take Immediately!

Step 1. The purpose of this first step is to... Read More

4 Simple Ways to Solve Your Debt Burden

Getting Behind Getting behind on your debts owed can be... Read More

5 Ways to Get Out of Debt

It has been said that everyday more and more people... Read More

Debt Settlement : What You Need To Know

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

Bad Credit Home Loan To Get You Out Of Debt

A "bad credit home loan" can help you climb your... Read More

How Do You Spell Debt Relief?

Of all the problems possible in a marriage, finances cause... Read More

The New Bankruptcy Law -- How Will It Affect Debt Negotiation?

In April 2005, Congress made sweeping changes in U.S. bankruptcy... Read More

Bankruptcy - The Easy Option?

Incredibly, since the changes in the bankruptcy law in April... Read More

Creating A Realistic Budget

Budgeting -- ooh, what a scary word! If you want... Read More

Individual Voluntary Arrangements- A New Alternative to Bankruptcy

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

Credit Repair - Understanding The Basics

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

The Road to Debt Relief

Living with debt is not something someone hopes for, but... Read More