Many will never be free from debt claims CAB

Officials from the charity the Citizen’s Advice Bureau have recently claimed that the typical person that is seeking assistance with their finances and debts has no chance of actually ever getting out of debt during their lifetime, which is a daunting prospect for the many people that have found themselves burdened with high levels of debt. Read more

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Personal debt soars

Britons are paying a whopping £93 billion a year in interest on borrowing, it has been reported this week.

That is an increase of £12.7 billion on the figure for the same time last year, raising widespread concerns that many people are going to be unable to manage their levels of debt.

Increasing domestic fuel bills combined with tightening borrowing conditions – and the short-term effect of Christmas spending – have led to a particularly tough environment.

The average household now pays £3,744 per year in interest on borrowing alone – an increase of £517 compared to last year.

According to uSwitch, which carried out the research, around one in four people acknowledge that repayments on their debts are not manageable.

Accountants KPMG have also warned that personal bankruptcies are likely to increase to 130,000 in 2008.

Spokesperson Mark Sands told the Daily Mail: “Those in difficulty will find that their options are becoming limited.”

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2008 set to be ‘a tough year financially’

2008 is “going to be a bit of a shock” and a “tough year financially” for consumers, according to a financial expert.

The end of fixed rate mortgages and the rising price of gas and electric bills both contribute to the more pessimistic financial outlook for next year, says AWD Chase de Vere.

Susan Hannums, savings manager for AWD Chase de Vere, said: “I think it is going to be harder to save, but the thing we need to drum in more than anything else is that we’ve got to start paying off and get away from using credit all the time.”

She added that borrowing “is really what got us here in the first place”.

Consumers need to think of other methods of saving to “turn things around”, concluded Ms Hannums.

Research from Credit Action earlier in the year revealed that total personal debt in the UK has reached £1.25 trillion.

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Consumers need examples of what they will have to pay back

Banks and credit card companies should provide a “practical example” of what a consumer needs to pay back, claims a debt counselling service.

Thomas Charles & Co has said companies should follow the examples set by mortgage lenders and unsecured loan lenders and show consumers what they will be paying back over a certain period of time.

“I think banks and credit card providers should be encouraged to do that off their own back. I think that if they don’t, the regulators will probably be just in asking them to do so,” said director James Falla.

He added that it would be a good idea to help the consumer as “interest rates are very confusing”.

According to Credit Action’s latest assessment of personal debt, the total UK personal debt at the end of October 2007 stood at £1,391 billion.

The growth rate increased to 9.7 per cent for the previous 12 months which equates to an increase of £122 billion.

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Consumers must get into saving discipline

Consumers need to “get into the discipline of saving”, according to an independent financial advisor.

Colin Jackson, director of Baronworth Investment Services, has said that once a consumer gets into saving, it becomes part of general financial overheads.

“If you decide that you really must save every month it’s no good saying that you’ll put £10 in a building society account every month, set up some sort of saving scheme where it’s paid by direct debit,” he recommended.

Another tip for effective saving would be to work out what money is being put away for.

Mr Jackson advised that consumers should use a building society account for a holiday. An Isa would provide greater tax-free benefits if the money was being saved for retirement purposes.

Recent statistics showed that total UK personal debt at the end of October 2007 stood at £1,391 billion. The growth rate has increased to 9.7 per cent for the previous 12 months.

This equates to an increase of £122 billion.

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Chiltern: Men heavier in debt than women

Men trying to get their finances under control are further in debt than their female counterparts.

According to research by Chiltern Debt Management, men have 20 per cent more debt than women and are less able to repay money borrowed each month as a percentage of contractual debt repayments.

Data showed that a woman on an informal debt management plan would take 22 less months to become debt free than a man.

Furthermore, men on these types of plan owe an average of £29,914 to 7.8 creditors while the female equivalent owes £23,946 to around 8.1 creditors.

Joanne Gill of Chiltern commented: “People who use a debt management plan aren’t trying to avoid repaying their debts, or get a large percentage of them written off by creditors, they’re fulfilling their responsibility to pay what they can and communicate with creditors to ensure both parties are being treated fairly.”

Personal debt totalled £1,363 in August this year according to statistics from Credit Action.

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