Archive for August, 2010

The Office for Budget Responsibility (OBR) predicts that household debt will be £1,823bn by end 2015 which is a growth of £159m a day. This would take the average household debt to £72,341 per household.

UK banks and building societies wrote off £10.9bn of loans to individuals in the last 12 months to end Q2 2010. In Q2 2010 they wrote off £3.47bn (£2.14bn of that was credit card debt). This amounts to a write-off of £38.06m a day.

Total UK personal debt at the end of July 2010 stood at £1,456bn. The twelve-month growth remained at 0.8%. Individuals owe more than what the whole country produces in a year.

Total lending in July 2010 rose by £0.3bn; secured lending increased by £0.1bn in the month; consumer credit lending rose by £0.2bn (total lending in Jan 2008 grew by £8.4bn).

Total secured lending on dwellings at the end of July 2010 stood at £1,239bn. The twelve-month growth rate rose slightly to 1.0%.

Total consumer credit lending to individuals at the end of July 2010 was £217bn. The annual growth rate of consumer credit rose by 0.2% to 0.2%.

Average household debt in the UK is ~ £8,628 (excluding mortgages). This figure increases to £18,000 if the average is based on the number of households who actually have some form of unsecured loan.

Average household debt in the UK is ~ £57,789 (including mortgages).

If you add to this the March 2010 budget report figure for public sector net debt (PSND) expected in 2015-16 (excluding financial interventions) then this figure rises to £110,012 per household.

Average owed by every UK adult is ~ £29,918 (including mortgages). This is 126% of average earnings.

Average outstanding mortgage for the 11.4m households who currently have mortgages now stands at ~ £108,825.

Britain’s interest repayments on personal debt were £66.9bn in the last 12months. The average interest paid by each household on their total debt is approximately £2,656 each year. According to PwC the average household will need to spend approximately 15% of net income purely to service the interest payments arising from this debt.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,467 per average UK adult at the end of July 2010.

Statistical Sources – Unless otherwise indicated statistics in the “Total UK personal debt” section are calculated by Credit Action – primarily using the Bank of England’s debt figures.

Today in the UK

·         The average household debt will decrease by – £0.19 today (it grew by £11.11 a day in January 2008)

·         381 people everyday of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 52 seconds during the working day.

·         1,359 Consumer County Court Judgements (CCJs) were issued every day during Q2 2010 and the average judgement amount was £4,063.

·         In the last 12 months consumers saved an average of £2.80 every day

·         Citizen Advice Bureaus dealt with 9,000 new debt problems every day in England and Wales

·         The average cost of raising a child from birth to the age of 21 is £26 a day.

·         1,000 people are seeking some form of formal debt rescheduling every working day.

·         230,137 unsolicited telephone calls made to UK consumers daily by debt management and personal loan companies

·         103 properties were repossessed every day during Q2 2010

·         362 people a day became unemployed for more than 12 months during 3 months to end June 2010

·         1,666 people reported they had become redundant every day during 3 months to end June 2010.

·         £351,500,000 is the amount that the Government Public Sector net debt (PSDN) will grow today (equivalent to £4,068 per second).

·         £126,580,000 is the interest the Government has to pay each day on the UKs net debt of £927.4 bn. This is estimated to rise to £182m a day in 2015-16.

·         195 mortgage possession claims will be issued and 147 mortgage possession orders will be made today

·         363 landlord possession claims will be issued and 255 landlord possession orders will be made today.

·         The UK population is projected to grow by 1,178 people a day over the next decade

·         23.0m plastic card purchase transactions will be made today with a total value of £1.101bn.

·         7.6m cash withdrawals will be made today with a total value of £492m

·         The average car will cost £15.13 to run today

Source:  creditaction.org.uk

The government is wasting £6.6bn a year by failing to step in early to help people struggling with debt, according to charity Citizens Advice (CAB).

In a response to the government’s spending review, the CAB argued that this money could be saved if government focused on tackling consumer problems early, rather than incurring extra costs through "unnecessary bureaucracy and poor service standards in the public sector" once problems were exacerbated.

The debt advice charity identified reform of the benefits system as a key money-saving priority, adding that 81 per cent of respondents to a recent poll of CAB advisers and clients felt that the way the system was administered was too complex.

It also urged government to keep an eye on mortgage arrears and homeowner debt problems, claiming that early intervention to help homeowners would avoid repossession costs for the Treasury estimated to be £16,000 per case.

Steven Jackson of beatmydebt.com agrees that people need early access to information and support. "The number of people suffering with personal debt problems is clearly on the increase and is likely to get even worse as public sector spending cuts start to take affect".

"The promotion of good information and advice about what to do if you find yourself struggling with debt is vital if problems are to be kept under control" Jackson said.

Processes need to be simpler and fairer

Gillian Guy, chief executive of the CAB, said: "If it is serious about fairness and responsibility as well as growth, the government must use the opportunity of this spending review to create simpler, more efficient ways of doing things and as a result make life simpler and fairer for people relying on public services."

The CAB urged the Department of Business, Innovation and Skills (BIS) to change the approach to enforcement, by ensuring that the cost of enforcement against rogue traders who rip off consumers does not exceed the penalty fees extracted by taking action against them.

The charity also called on BIS to tackle head on what it called "poor quality and high cost debt management businesses" that have sprung up due to the recession.

Guy added: "We are urging the chancellor not to abandon those most in need.

"Problems like debt and housing problems can all spiral if left unaddressed, resulting in more costly solutions as well as mental and physical symptoms, long-term deterioration of health and the associated impact on the economy."

In 2009/10 benefit-related enquiries accounted for 30 per cent of all enquiries dealt with by the CAB. The charity added that poor administration of benefits exacerbated health problems which became a "major cost" to the economy in terms of increased treatment costs, productivity losses, reduced tax revenue and higher welfare payments.

Source: beatmydebt.com

Owing money is not an unusual situation for most people to be in at one point or another in their lives. However, should you constantly be in the red and find you are not making any progress when it comes to making repayments, it may be a sign that you have serious debt problems and need help getting your finances under control.

Whether you’re struggling with payments on credit and store cards, overdrafts or personal loans – or perhaps a combination of all three – trying to deal with an excessive amount of debt is bound to be an unpleasant situation for anyone to be in.

Consistently going into and exceeding your overdraft could be a sign you are in need of debt management advice. While some bank accounts may not charge for entering a pre-agreed overdraft limit, exceeding this amount will see you hit with a fine. If you’re incurring such fees on a regular basis and are unable to take steps to avoid them, now could be the time to get help managing your debts.

Alternatively, you may find that creditors are constantly trying to get in touch with you requesting payment for the money that you owe them.

This may come in the form of telephone calls, emails or even letters posted to your home – if you haven’t made a repayment for a significant period of time, you may receiving correspondence claiming it will be the "final demand" they make before taking further action.

Having difficulties repaying unsecured borrowing such as loans and credit cards is often a source of many people’s debt problems. If you have fallen behind with a monthly demand payment you will not only find that the interest charged continues to accumulate, but you are also hit with a non-payment fee. Of course, if you simply do not have the money in the first place to pay, this will only exacerbate the debt problems you are already in, increasing the overall amount you owe.

And while borrowing more money – perhaps by taking out a second credit card – can provide some short-term relief, doing so could be a sign of the major debt problems you are in, as it will only raise the amount you have to pay back in the long run.

However, seeking out debt advice at the first stage of encountering problems with paying back money can provide a sustainable solution to your financial difficulties, helping you to get back into the black – and most importantly – stay there.

Source: myfinances.co.uk

A debt charity has said it was unable to help around half of all self-employed people who contacted it because they did not have enough income.

The Consumer Credit Counselling Service said more than 6,500 people had contacted its Self Employed Centre for help so far this year.

But in half of cases the charity was unable to help them find a way out of their financial problems because they did not have enough money to go on to a repayment plan.

In some cases, it said people were not bringing in enough just to meet their essential living costs, let alone repay their debts, while in extreme cases people could not even afford the fees associated with going bankrupt.

The charity said a large proportion of those contacting it for help worked in service industries, where they were employed as hairdressers, gardeners or taxi drivers.

It said these were the types of services that consumers cut back on when they were tightening their belts, leaving this category of unemployed people particularly vulnerable to the economic downturn.

The group said only around 1,600 of the self-employed people who had contacted it had enough money left over after meeting their essential living costs to go on a debt management plan, under which they reach an agreement with their creditors to repay their debt at an affordable rate.

Others were advised to take out an individual voluntary arrangement or go bankrupt or take out a debt relief order – all different forms of insolvency – while in some cases people were able to afford their minimum monthly repayments once they had received help with budgeting.

But in half of the cases it looked at, people were told they needed to find a way of increasing their income, such as by working longer hours, getting a second job or taking in a lodger.

Geoff Waugh, head of the CCCS Self Employed Centre, said: "The economic difficulties of the past few years have meant that a lot of people are carrying out work that they would have previously paid other people to do. This has left many self-employed people without work and unable to maintain their debt commitments. The personal finances of the self-employed are often complicated, with little distinction between their personal and business finances."

Source: The Press Association

Half of those contacting debt charity Consumer Credit Counselling Service’s (CCCS) Self Employed Centre are unable to repay their debts.

The CCCS centre, which specialises in dealing with the personal finances of the self employed, has helped over six and a half thousand people this year.

However, only 1,600 were in a position to enter into a debt management plan (DMP) and repay their debts as over half of callers had a deficit budget and therefore no money to start repaying their debts.

This is very similar to 2009 when only nine percent of people calling the centre were in a position to enter a DMP and half of callers could only be recommended to increase their income.

CCCS says that a large proportion of those contacting the centre are from the service industries such as hairdressing, gardening and taxi driving. Providing services that people are likely to cut back on when tightening their belts, this category of self employed are particularly vulnerable in an economic downturn resulting in many being unable to repay their debts.

While many self employed are struggling with debt, ironically some people are finding self employment to be the solution to their personal debt problems. One man who had contacted the charity for help with debt problems because he had lost his job retrained as a plumber which allowed him to earn enough money to enter into a DMP and start repaying his debts again.

Geoff Waugh, head of the CCCS Self Employed Centre, comments:

"The economic difficulties of the past few years have meant that a lot of people are carrying out work that they would have previously paid other people to do. This has left many self employed people without work and unable to maintain their debt commitments.

"The personal finances of the self employed are often complicated, with little distinction between their personal and business finances. It is therefore particularly important that anyone self employed who is struggling financially should seek help as soon as they realise they have a problem. At the very least we can help with ensuring enough money is set aside for everyday living costs."

Source: myintroducer.com

Four million women and 3 million men defying downturn and continuing to spend heavily, says comparison website uSwitch.

British shoppers are in the grips of recession shopaholism, having amassed nearly £24 billion of unsecured debt during the downturn, according to product comparison website uSwitch.

The website defines a recession shopaholic as someone who has built up more than half of their unsecured debt through fashion purchases – and while there are more female than male shopping addicts – about 4 million and 3 million respectively – men acquire a higher average personal debt of £3,425 compared with £3,353 for women. Unsecured debt among British females totals more than £13 billion, compared with more than £10 billion for men.

Anne Robinson, the head of consumer policy for uSwitch.com, says consumers have simply ignored recent headlines: "Despite the financial constraints, women have carried on copying the lifestyles and shopping habits of their idols and ignoring the debt they are racking up in the process."

Some have even regarded the recent spate of bad economic forecasts as a reason to carry on spending beyond their means, with 4% stating that they are spending more to "cheer themselves up".

Women shopaholics acquire 77% of their personal debt and men 75% through buying clothing, accessories and grooming. However men typically spend more than women on films, technology and computer games – £386 compared with £186 – and on grooming products, with men spending £338 compare with £191 for women.

Ainslie Walker, the head of operations and product development at Gentlemen’s Tonic at Selfridges, believes that the downturn in the economy has not been seen in the male grooming industry, which has plateaued but not dipped. But rather than see it as an indulgence that they can not afford, Walker believes that men are investing in themselves, adding that "good grooming" helps candidates stand out at job interviews.

Shopaholism, or oniomania, is the technical term for the compulsive desire to shop, a condition first diagnosed in 1915, with sufferers often experiencing the highs and lows associated with addiction.

The uSwitch research also found that for some people, being in debt is an accepted way of life. "Jenny", a 24-year-old primary school teacher, left university with an overdraft which she has carried into her professional life. Like many other shopaholics, Jenny has exhibited the classic trait of hiding how much she has spent on purchases from her family, for fear of being judged profligate. "They have said to me, ‘oh do you need that Mac’ … sometimes I will lower how much I have spent on something by around £20 or so," she says.

Source: Guardian.co.uk

Following the recent economic downturn, how do you know whether your finances are in danger? Would better information help? If so, here’s 10 signs of the potential danger and how to avoid them!

How much have you been affected by the economic downturn? If you or your partner have lost your jobs or had to take a pay cut or a pay freeze, you’re no doubt feeling the pinch.

But are you coping? Have your costs, such as your mortgage payments, fallen as well? Have you got savings to fall back on? Or are you among the ‘most at risk’ – those hardest hit by the downturn who are starting to do things that will put them in serious financial difficulty in the future?

Here are 10 signs you’re putting yourself in financial danger:

1) You’re only paying the minimum monthly repayment on your credit cards

Minimum monthly repayments are typically set at ridiculously low levels. This means that if you’re only managing to pay this amount, it’s going to take you a long time to pay off your credit card debt in full. Not only that, but you’ll end up paying far more in interest before you clear your balance.

2) You don’t know how much you owe and you don’t want to find out

If you’ve lost track of how much you owe and have no idea how you ended up in debt, you’re probably overspending. Losing track of what you’re spending where is not a good idea, especially if you’re spending large amounts. It indicates you’ve really got no control over your finances.

3) You’re borrowing more to pay off your debts

Borrowing more and getting further into debt to meet your other debt payments is a dangerous path to follow – particularly if you’re using payday loans, logbook loans or credit card cheques.

Equally, if you’re taking money out on your credit card just to cover monthly payments on other debts, you could find yourself in serious trouble in the future. Find out more in Six dangerous ways to borrow.

4) You’re spending more than you earn

If you have no idea what your budget is and you’re spending more than you earn each month, or you’re not sure whether your salary is covering your expenses, you could be in serious trouble.

5) You use your credit card to pay for everyday spending

If you regularly use your credit card to pay for necessities such as food or petrol and can’t afford to clear the balance each month, your debts will continue to build up and put more strain on your finances. 

6) You’re regularly late paying bills

If you regularly fail to make your bill payments on time, your cheques bounce, or you overspend on your credit card or overdraft, you’ll incur extra fees and charges from your bank. This will drive you further into debt and could also damage your credit rating.

7) You don’t have any savings

If you’re unable to put even a little money aside into a savings account each month because your debts are too high, that’s not a good sign. Having said that, it is usually wise to pay off your debts before starting to save – so it’s the right strategy, but don’t be blase about it: it’s a sign that you are struggling.

You find it hard to talk about your situation

If you find it difficult to be honest with your friends and family about your debt problems, or you’re lying to them about your spending habits, you could be in denial about your debt.

9) You’ve been rejected for credit

This could be because you’ve already got too many credit cards – even if you no longer use them – or because you’ve missed payments in the past.  All of this can damage your credit rating. Find out more in What REALLY damages your credit rating.

10) You’re constantly worried about your finances

Research from talkaboutdebt.co.uk has revealed that 61% of people in serious debt aren’t sleeping due to debt stress, and 29% have taken up to six months off work. If your money problems are affecting your working life, leisure time, and how you sleep, it’s time to seek help.

Help yourself

If any of the situations outlined above apply to you, you’re probably feeling concerned. Debt can have a serious impact on your life, but the important thing to remember is that you don’t have to deal with it on your own.

Simply talking about your financial problems with your friends and family can feel like a huge weight has been lifted off your shoulders. What’s more, it’s a big step in helping you to face up to your debt problem.

And don’t forget that lovemoney.com can also help. Why not have a wander over to Q&A where you can ask other lovemoney.com members for advice? Many have been through similar situations and can share tips from their own experiences on how best to tackle a specific problem you raise.

Seek advice

If you’re still feeling completely at a loss as to how you’re going to tackle your debts, contact a free independent debt advisory service such as Citizens Advice, National Debtline, the Consumer Credit Counselling Service, Payplan and Advice UK. You can read more about all of these in Get out of debt with free advice.

These charities will be able to provide guidance on a range of options to help you sort out your debt problems, and you won’t have to pay anything for this advice.

But whatever you do, don’t bury your head in the sand and think your debt problem will go away by itself. Because it won’t. There are people out there who can help you and the sooner you start to face your debts, the easier it will be to get yourself out of debt. So don’t give up hope!

Source: lovemoney.com

The number of personal insolvencies in England and Wales reached 34,743 in the second quarter of 2010 – a rise of five per cent on the same period in 2009.

Figures released today by the Insolvency Service show that the total decreased by 2.6 per cent on the first quarter of 2010, although the number of debt relief orders (DROs) rocketed up to 6,295, a rise of 218 per cent on 1,978 for the same period in 2009.

The rest of the total personal insolvency figure consisted of 13,466 individual voluntary arrangements (IVAs), an increase of 10.2 per cent on the corresponding quarter in 2009, and 14,982 bankruptcies, representing a decrease of 20.6 per cent on the corresponding quarter of 2009.

The level of UK personal debt is now around £1.46 trillion with the average adult owing just under £30,000 inclusive of mortgage, or 127 per cent of their average earnings.

Bev Budsworth, managing director of The Debt Advisor, said: “The coalition’s cuts are really beginning to bite and we are starting to see the effects on ordinary people.”

She added: “Not only does indebtedness have a crippling effect on individuals, it also has serious implications on the country’s finances. Therefore, it’s essential that we ‘recycle’ these people, getting them back on track and making a positive contribution to the economy by paying off their debts.

“We need a common sense approach to this issue, what we don’t need is endless government strategy ‘re-thinks’ that are in danger of undoing what has taken government working parties, the Insolvency Practitioners Association (IPA), the IVA Standing Committee, the Ministry of Justice (MoJ) and the Office of Fair Trading (OFT), nearly seven years to achieve.”

Source: insolvencynews.com

Surprising news has emerged that debt recovery business has declined by between 25 and 30% since the start of the downturn.

Whilst most would think that bailiffs would benefit from the credit crunch, onslaught of redundancies and economic uncertainty, the head of one of Britain’s largest debt recovery businesses has said that many bailiffs are becoming the unlikely victims of the recession.

Jamie Waller, founder and managing director of JBW Group, as well as the star of BBC programme Beat the Bailiff, said that the drop in business is down to people becoming more financially aware and seeking alternative debt solutions.

He told the Daily Mail newspaper: “People are taking a more careful approach to their finances since the recession started. It’s had the reverse effect, which has left many bailiff companies overstaffed.”

The Enforcement Services Association, the bailiff trade body, went some way in backing up these findings, stating that the amount of debt referred for collection by its members this year is 10% down on last year.

As the issue of personal debt in Britain is now headline news, rather than a taboo subject, it is thought that people struggling with their finances have become more likely to seek debt help and debt advice, rather than adopt the ‘head in the sand’ approach and fall into a debt spiral.

Agreeing that consumers have become more proactive when it comes to debt, Waller continued: “We are now seeing that 60% are paying up after receiving only a letter.”

The Bank of England base rate remaining at a record low of 0.5%, as well as lenders adopting a less aggressive stance in calling in bad debts, have also been attributed to plummeting bailiff business.

As several debt recovery giants are expected to make job cuts, the traditional image of a bailiff at the door could soon be a thing of the past, with Waller saying that debt recovering tactics have been changed to cut costs.

“We are handling a lot more cases over the phone, instead of turning up at people’s homes. In the past 18 months we have seen this increase by 38 per cent,” he said.

Something tells us that this announcement from the bailiff industry might not garner much sympathy from the British public…

Source:  debtmanagementtoday.co.uk