Consumers borrowing more than they can repay
Posted by Debt Management | Posted in debt management | Posted on 14-09-2010 -
According to the Bank of England, British consumers borrowed more than they could repay in the month of July. The Bank of England publishes its `Lending to individuals` figures for every month.
The figures for the month show that July saw a rise in debt figures, both for secured and unsecured debt. However, as compared to unsecured debt, secured debt was relatively small. Even then, over the last six months, figures for secured debt have gone up dramatically, growing to an average of about £800m per month.
Unsecured debt, on the other hand, went up by £173m, which was quite close to the six-month average of around £200m.
Unsecured debt comes at a very high rate of interest, more so credit card debt. In fact, credit cards attract a higher rate of interest than even what is offered on unsecured loans by banks.
Despite the prevalent state of the economy, studies reveal that people continue to spend through their credit cards. A recent article published in The Telegraph shows that Britain may face a ‘debt boom’ in the face of the generous credit card deals being offered by some banking institutions. In fact, despite the potential threat of double digit recession, banks are being more generous with issuing credit cards and tempting consumers with offers of cheaper debt than what they had offered during the 2007 economic turmoil.
Talk to most debt management experts and they will warn that though the improved rates on these cards are good for the short term, they could prove costly to the people who have debts when this introductory offer comes to an end.
The number of organizations and individuals declaring bankruptcy continue to rise. However, those in debt should realise that bankruptcy is not the only option to dealing with debt. There are debt solutions such as an IVA Individual Voluntary Arrangement which are a better option to bankruptcy. If you are in debt, you can seek debt advice from debt management firms to understand the various debt solutions and debt management plans that are available to help you tide over the tough times.