The Realities of Debt
Debt problems in the UK
The UK is suffering from unprecedented levels of personal debt. The consumer debt barrier broke the £1,000,000,000,000 (£1 trillion) barrier in 2004.
Why do so many people suffer such trouble over debt? Part of the problem is that it is so easy to borrow. Also, high property prices have led a large number of homeowners to take on more than they can handle.
There are many offers that seem too good to be true – and they are. Some credit cards offer 0% interest rates but only for a limited time and when that period has finished, you end up paying an overly high rate. People can easily kid themselves that they are managing their credit card debt by paying the minimum amount every month. But with high interest rates, it can take years to pay off a relatively small debt this way.
Store cards are more popular than ever but the interest rates are very high unless the balance is paid off within the interest-free period. And because the Bank of England’s base rate of interest is relatively low, many people assume that means debts are more manageable.
However, as inflation is also low, the value of the debt does not decrease as quickly as in the past, and of course when debt starts to spiral out of control, the first impulse is often to consolidate the various arrears into one loan.
While this can sometimes make debt easier to manage and even offer a lower overall interest rate, too often such loans serve as a green light to get into more debt, offer unfavourable rates and do little to deal with the root causes of the debt.
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You can divide debt problems into two categories; temporary debt and chronic debt, for more information and advice call us on 07770 444 108.