When is debt problem debt?

August 16th, 2008

Anyone who spends more than a quarter of their salary repaying loans is on the threshold of becoming over-indebted, according to guidelines issued by the Department of Business, Enterprise and Regulatory Reform.

And yet the proportion of people spending almost a third of their monthly income on unsecured loan repayments in the UK has doubled over the past year.

Figures from credit reference agency Callcredit show that 14% of the public are spending over 30% of their income on these repayments and the number of people spending over half of their monthly income on unsecured debts increased from 2% last year to 6% today.

The findings may suggest consumers are becoming more frugal in the wake of the credit crunch and are keen to cut down on their debts with unsecured loans becoming more difficult to find and credit card interest spiralling.

Consumers do not appear optimistic about their financial future with 43% of individuals believing that their current situation is going to worsen over the next 12 months, compared to 24% who think it will improve.

As heating and lighting costs are set to soar over the next year following recent prices from British Gas and EDF, the older age groups appear far more pessimistic than younger generations with 54% of all those aged over 55 years believing that their situation will not improve over the coming year.

Another survey by Yorkshire Bank suggets people are spending less and partaking in the ‘saving now, buying later’ ethic. It found that 73% of people surveyed agree that they are more careful now with their money compared to 12 months ago.

The increasing proportional spend on unsecured debt paints a concerning picture of consumer finances within the UK and this level of debt servicing would appear to be unsustainable.

With many people unable to see any light at the end of their financial tunnel, there is a perception that worse is still to come. The best advice to any individual who is struggling with debt repayments is to speak with their lenders now before things become unmanageable later.

This entry was posted on Saturday, August 16th, 2008 at 7:22 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

When is debt problem debt?

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