Debts rising as savings fallMore consumers seek debt advice as economy falters
11 October 2008
As the credit crunch continues to bite, new figures show consumer borrowing has risen to £5.9 billion.
The government may be bailing out the financial markets but little is changing for consumers. With the cost of essentials, such as food, fuel and electricity, rising in price the fastest, more and more people are finding it hard to cope financially.
New figures from Citizens Advice reveal that more people in England and Wales are seeking advice on how to manage mortgage and secured loan arrears and fuel debts. The CAB says it is dealing with 35% more problems with mortgages and secured loan arrears over the last 12 months, compared with the previous 12 months.
The most common reasons cited for people falling into arrears were loss of job or failure of business, ill health and relationship breakdown.
IFA search engine Unbiased.co.uk reports debt levels have risen by almost £800 million in comparison with the latter half of 2007. At the same time, consumers' savings levels have dropped by £4 billion compared to 2007. The amount added to ‘rainy day' funds dipped to £38.5 billion earlier this year from £42.9 billion at the same point in 2007.
How to deal with debt
Which? Money editor Martyn Hocking said: ‘As the widespread impact of the credit crunch continues to be felt, consumers really need to take control of their finances. People are currently feeling the pinch - increasing borrowing and reducing saving will only provide short term relief and risk making a bad situation much worse.’
Recommendations in Which? Money’s guide to debt control include:
- Always pay secured and priority creditors in full. Secured debts include loans and credit agreements under which the creditor has a hold over an asset
- Try not to obtain further credit while experiencing difficulties
- Maximise your income and claim all the benefits and grants to which you're entitled
- Try to make lifestyle changes to cut spending
- Check your employer is using the correct tax code and that you've taken advantage of all available tax allowances, including the child and working tax credits
- Consider remortgaging your home
- Minimise other costs
- Get independent advice early from Citizens Advice, National Debtline or the CCCS
For practical advice from Which? on how to control your debt take a look at our guide to debt control.
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