Debts rise as consumers take out cards and loans

29/07/2009

One in four UK adults have taken on still more debts over the past year, despite the continuing effects of the credit crunch and economic downturn.

According to Moneysupermarket.com, only a minority (40 per cent) have reduced their so-called "non-mortgage" debt, from cards and personal loans.

Just 16 per cent say that they now have a lot less money owed than they did 12 months ago.

Commenting on the results, EuroDebt director Kevin Still said: "One of the key factors to consider behind why 25 per cent of those surveyed have increased their debt burden is whether they feel this is through necessity. A debt spiral is fairly easy to get into if credit is used to fund existing credit commitments and household expenditure. The cost of this borrowing may also be prohibitive.

"Doorstep lender Provident Financial has just reported a rise in profits through the recession. The children's charity Barnardo's has criticised them for charging 'extortionate' interest rates. Provident confirmed that some of its customers were being charged annualised interest rates of up to 545 per cent.

"In such circumstances a non-borrowing debt solution may be more appropriate, like a Debt Management Plan, an IVA or even bankruptcy in some circumstances."

Tim Moss, head of loans and debt at moneysupermarket.com, added: "For those who have seen significant increases in their indebtedness over the last year, I would strongly encourage them to go through their household budget ruthlessly, line by line, and identify where outgoings can be cut."

Earlier this week, the International Monetary Fund said that seven per cent of credit card debts in Europe might be defaulted on, due in part to the recession.

Rates in the UK are likely to be even higher, with consumers holding consistently higher [repeat] levels of personal debt than those on the continent.

Tags; Debt Management and Banking, Young Family Finances, Credit Card Lifestyle, Recent Graduate Debt,

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