Credit is already harder to come by; many fixed-rate mortgages will soon convert to more expensive variable-rate loans; and the Credit Services Association, which represents debt collectors, reckons its members will try to retrieve £24bn this year and expects a 20 per cent annual increase in that figure over the next few years.
In 2000, they handled just £5.2bn.
The amount of debt being chased by Britain's bailiffs has soared by 70% over the past two years. The typical household falling into difficulty owes £25,000, spread across an average of 15 different lenders. 20 million cases have been passed to debt collectors over the past year.
These increased debt worries will create mental health problems for some people. Research conducted by Mind, the mental health charity, shows that debt can trigger anxiety and stress, depression, self-harm and suicidal thoughts. Mind has already identified poverty, debt and mental health as the theme for its 'Mind Week' campaign this year. A quarter of those in debt are receiving treatment for stress, depression and anxiety, from their GP.
There are many contributing factors to debt, mainly due to unforseen circumstances, such as illness, loss of employment, separation, also the ease of which credit has been made available to people who possibly should not have been offered certain types of credit. In many cases purely the fact that people ignore debt and bury their heads in the sand can be the start of a downward spiral.
- Nearly 2/3 of people don't worry about their debts until they have lost control of finances.
- 33% of the population have no idea how much they owe.
- 30% of people use personal loans & credit to survive until payday.
- More than 3 million people are struggling with energy bills, 4.7 million are in debt to their water company and more than a million have had their phone cut off.
- One in 20 people have five or more credit cards.
According to Relate, the biggest cause of rows within a relationship is not infidelity but money.
By following some simple rules, people in debt can minimise the distress they face.
An adviser from a leading indepedent free debt helpline gives her golden rules for dealing with debt and steering clear of the pitfalls:
- Be wary of borrowing more money
Don't borrow money to pay off your debts without thinking carefully. Get advice first.
You should be particularly wary of taking out a loan secured on your house to consolidate the debts you already have.
If you turn unsecured loans into a mortgage you could lose your house if you don't keep up the payments.
Consolidation loans mean borrowing more money, over a longer period and will mean more interest to pay. This could make your situation worse in the long run.
- Don’t ignore the problem.
It won't go away and the longer you leave it, the worse it gets.
Get in touch with a qualified professional such as My Debt Lifeline who will begin the process of dealing with your creditors on your behalf, starting off with looking to freeze both interest and further charges on all your outstanding unsecured debts.
- Adopt a stategy
Make sure you tackle your priority debts first.
Priority debts are those that could lead to you losing your home, being evicted, having your gas or electricity cut off, or lead to fines.
This means you should make sure you have made arrangements to pay your essential household bills such as your mortgage or rent, loans secured on your home, council tax and utilities before making offers to pay unsecured credit debts.
Your debt situation may get a lot worse if you miss payments on your mortgage to keep up to date with a credit card.
- Maximise your income
Make sure you are claiming all the benefits you are able to: Could you claim Tax Credits? Are you sick or have a disability?
If you are on a low income you may be able to claim a rebate on your rent and council tax.
Contact an independent welfare rights agency for advice and a benefits check.
If you have lost your job, or are off work because of illness, check whether your payments were covered by payment protection insurance. Contact the credit company if you are not sure.
Make sure all adults in your household are contributing to the household bills.
Check with the Inland Revenue that your tax code is correct for your circumstances.
You may also be able to save money by switching to better deals on a range of goods and services.
- Speak to an independent free advice service
Contact My Debt Lifeline on 0800 043 3710 for more help. We are a free service.
You can also go and see a local advice agency such as a Citizens Advice Bureau or one of Advice UK's money advice centres |
