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Debt crisis deepening warns Citizens Advice

No chance of ever paying off debt for many

New research from Citizens Advice shows that many consumers turning to Citizens Advice Bureaux for help have no realistic hope of paying off their debts in their lifetime.

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Citizens Advice offer free and independent debt advice

The CAB research, based on analysis of over 1,400 cases, shows that debt clients owe an average of £16,971 – two thirds more than in 2001. It will take the average client around 93 years to pay off the money they owe at a rate they can afford.

Citizens Advice Bureaux have seen debt enquiries double in the last ten years. Debt is now the number one issue advised on in bureaux, accounting for one in three of all enquiries, and CAB advisers are currently dealing with an average of 7,241 new debt problems every working day.

Key Citizens Advice findings

  • On average CAB debt clients owed £16,971 in 2008, two thirds higher than in 2001.
  • More than half of the clients in 2008 had four or more priority debts, such as mortgage or rent arrears, fuel bills or council tax arrears.
  • One client in ten had 10 credit debts or more.
  • Forty five per cent of the homeowners had mortgage or secured loans arrears in 2008, up from 30 per cent in 2004.
  • Thirty per cent of the homeowners spent half or more of their monthly income on housing costs.
  • Two thirds of the homeowners with mortgage or secured loans arrears were in priority need for rehousing
  • Forty three per cent of the CAB debt clients in 2008 were in fuel poverty because they spent more than 10 per cent of their income on fuel.
  • Half of CAB debt clients were in water poverty because they spent more than three per cent of their income on water.
  • More than half of the clients (58 per cent) had no spare money to pay their credit debts.
  • Clients who had spare money to pay their debts would take on average 93 years to repay them in full.

CAB debt clients tend to be poorer than the population at large, with an average net monthly household income of £1,021 – less than two-thirds the national average. The average spent on housekeeping per week was £69.50, far below the national weekly average of £142.

‘Unpayable debt condemns consumers to lifetime of poverty’

using a computer

Decide which debt is the most expensive, and pay this off first

Citizens Advice Chief Executive David Harker said: ‘These findings make sobering reading, especially as they are based on data collected just before the worst of the credit crunch began to bite. Since then we have seen an enormous rise in the number of people turning to us for help because they have lost their job.

‘In the current climate it is absolutely vital that lenders and creditors treat people fairly and sympathetically and do everything they can to help ease their debt problems and avoid adding to them.’

Which? debt advice

Consumers struggling with debts should seek independent, free debt advice from organisations such as the Consumer Credit Counselling Service (0800 138 1111), National Debtline (0808 808 4000) or their local Citizens Advice Bureau (number in the phone book).

While bankruptcy, debt management plans and Individual Voluntary Arrangements (IVAs) can be a good solution for some, it is vital to get independent advice.

Consumers should avoid commercial debt management companies – why pay for a service that is available better and free elsewhere?

For more detail, see the Which? guide to dealing with debt.

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