We all know
that we’re going through what is probably the worst recession in years at the moment. It’s hard to avoid the stories of businesses closing down -- including major high street names like Woolworths -- and the tales of job losses that come hand in hand with that. And, it seems like everywhere we look there are tales of people who are having incredibly difficult times with their debts.
But, what might surprise many people is the fact that debt problems are not just hitting certain classes or types of UK consumers. There is a tendency to assume that it is people who lack money who run up the highest debts and who have most problems servicing their commitments. This is actually a problem that could potentially affect every single one of us -- rich or poor -- at the moment. Figures show that UK consumer debt could be running as high as £1.5 trillion right now.
For example, the UK charity CCCS (the Consumer Credit Counselling Service) says that it has seen an increase of nearly 9% on 2007 figures of clients asking them for advice who earn more than £30,000 as a household. This figure now accounts for around 12% of its client base.
The charity also found that people who ask them for advice may be technically better off than they were a few years ago but they are finding it much harder to pay back their debts. Economic issues such as redundancies, job losses and dropping property values make it hard for the average consumer to manage multiple debts even if they technically do not owe that much in the first place.
The CCCS also anticipate that things could carry on getting worse rather than better for a while yet. The debts that we have incurred during the economic boom times may now also be too great to manage via simple solutions like debt management programs. The charity has noticed that only 35% of its clients were able to take this route compared to 42% in 2007.
Many of the problems that we experience here are down to the boom years and to lender attitudes towards borrowing during this time. It has been relatively simple to get credit products over the last few years, especially if you were earning well and your property value was rising in line with sector rises.
But, the fact that it is now much harder to get access to credit means that many people who would traditionally borrow again to repay their debts can no longer do so.
Add to that the fact that many are left with little or no or even negative equity in their homes and that cuts off another debt escape route.
People who are having debt management problems would be well recommended to talk to an advisory service such as The CCCS or The Citizens Advice Bureau to get some impartial advice and help choosing the right solution for their circumstances. It doesn’t matter whether you consider yourself to be well off or poor -- debts will still cause you problems if you let them get out of hand.