Debt declines as Brits make repayments

06/10/2009

Britons are paying off debts when they can, new figures show.

October 2009 data from Credit Action, a financial charity, highlighted the fact that net repayments of around £300 million of consumer credit were made last month.

This includes credit cards, personal loans and other cash advances.

A report from news source Citywire suggested that some families looking for UK debt help are using overdrafts rather than credit cards.

This is due to the fact that average overdraft AERs come to around 17 to 18 per cent, very close to the typical credit card APR.

Effectively, this means that borrowing through a bank account and borrowing via cards cost roughly the same, for those shut out from low-rate card deals due to patchy previous repayment records.

However, Citywire advised applicants that it "makes sense" to apply for the lowest-rate card available in order to reduce debts over the long term.

Kevin Still, EuroDebt director, commented: "Swapping debt from one card issuer to another had been become almost a national sport over the last decade, but lenders have tightened lending criteria and policy rules to make this much harder to achieve. For many a 'debt spiral' resulted from balance switching and using up the available balance on the more expensive cards. People failed to plan for the end of the promotional interest free periods. Using these promotional offers requires reading the small print carefully, doing the maths and a lot of self-discipline.

"Nearly two thirds of people that take out debt consolidation loans end up in more debt than they started with. Recognising the point when you are using credit to pay off other credit is the point you need to take debt advice. Managed debt solutions like a Debt Management Plan are popular because they provide support over a long period of time where many creditors may be involved."

Credit Action also said that, in October 2009, average household debts excluding mortgages come to £9,180.

Households who have unsecured credit outstanding typically owe £21,355.

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

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