A Serious Problem?

The news papers are full of headlines illustrating the spiralling debt we are amassing, but how much of a problem is it? There are four key causes why it is such a problem;

1. Although it is only a small fraction of the total population whom find their debt a heavy burden – around 4 million – it is spread disproportionately throughout it as a whole. The most effected are low income families, lone parents and people in their twenties or thirties.
2. Even though it seems a small portion of the country are struggling currently, a small change in rates and another 10 million of us could start finding it difficult to keep up repayments.
3. The massive trillion pound debt pile has put many households in an extremely vulnerable position, any shocks to the economy, whether it be a poorly executed budget or external factors such as oil prices, acts of terror or wars, any downturn in the economy would see a further 15 million people start to struggle with their repayments.
4. The downturn in employment in certain sectors – predominantly the low income sectors – and the loss of earnings is the usual trigger for a debt spiral to begin.

Once in a debt spiral it is often very difficult to free yourself from it, a typical spiral is triggered by loss of income - then the spiral starts - missed payments, penalty charges, pressure from creditors and legal proceedings. Typically debt advice is not sought till after legal actions are commenced, this need not be the case, if more debtors actively looked for advice before their debts became insurmountable then they could avoid legal proceedings and keep their credit worthiness.

11 December 2006 | Debt Help | Comments