Bad debt ‘to heighten effects of credit crunch’
Article Category: Debt Management Help and Advice
The issue of bad debt is set to exacerbate the effects of the credit crunch, according to a new report.
A new study by Datamonitor has predicted that the UK consumer credit market will dip in 2007 before reviving slowly, from gross advances of £207.4 billion in 2006 to £229.8 billion in 2011.
Analyst Maya Imberg noted that the US sub-prime crisis looked set to have a negative short-term impact, made more pronounced by bad debt levels.
"Both lenders and consumers will find the consumer credit market tougher as a result of the global credit crunch as well as the prevailing issue of bad debt," she stated.
Lenders have been predicted to tighten their criteria, raise prices and reject a higher number of loan applicants than before, while credit availability will be particularly difficult for those with poor credit records and the self-employed.
However, competition for borrowers with good credit records looks set to remain "fierce" in the mainstream markets, the report added.
The Debt Advice Bureau this week noted that using credit to make mortgage payments may incur the risk of debt.
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