Year-long recession creates debt management need

20/01/2010

One in five people believe it will take them over a year to pay off their debts from the last twelve months, according to new research.

The UK has now been in recession for 362 days – the longest since records began. The Post Office's Consumer Credit Report found that a tough year has left millions reliant on credit to cover day-to-day living costs.

The Post Office says that more than 12 million adults intend to use their credit card for daily purchases such as grocery shopping this month. That marks an eight per cent increase on last year.

Indeed, 3.3 million people expect to spend more on their credit cards in 2010. The findings suggest a worrying reliance on credit at a time when joblessness is expected to increase over the course of the year.

The Post Office report seems to confirm that whilst overall lending is down, those that are in financial problems are having to use credit lines more.

A debt spiral remains a major debt reason why people start a Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA), according to Kevin Still, director at EuroDebt.

He added that "the lukewarm response from the UK Cards Association on helping vulnerable clients also remains a concern, as card interest makes up the majority of minimum payments".

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