Get Debt Advice before it Is Too Late
Responding to a new report suggesting that the average household had found it more difficult to repay their debts compared with last year, Debt Advisers Direct have warned consumers to take extra precautions with regard to their finances in the run-up to the Christmas period, and have advised households already struggling with debt to seek professional debt advice as soon as possible.
A new report for the Bank of England entitled ‘The financial position of British households’, carried out by NMG Research, is a snapshot of the financial situations of the average British household at the end of September and beginning of October.
The report claimed that the average household had found it more difficult to service existing debts than in the previous year, largely due to higher household bills which reduced ‘available’ incomes. It also said that the purchasing power of this available income had reduced due to high inflation.
More than half of the households in the survey had reported a fall in their monthly available income compared with the previous year.
A spokesperson for Debt Advisers Direct commented: “It’s been known for some time that British households have been under pressure financially in the past year, but these figures demonstrate the extent of the problem. In particular, a drop in available income of more than £100 can make a significant difference to the ability of households to meet their commitments and repay debts.”
The fall in available income was particularly evident amongst homeowners. In both high-LTV and low-LTV categories, 39% of mortgagors reported a fall of more than £100, while a further 19% reported a fall of £51 to £100.
“For people with several debts who want to reduce their outgoings and simplify their finances, a debt consolidation loan might be the best option,” she said. “By spreading the repayments out over a longer period of time than the original debts, monthly payments can be lower, which can make a big difference to available income. However, more will be paid in interest as a result of the longer repayment period.
“For those with more serious debts, particularly if the repayments exceed the household’s available income, a debt management plan could help. This involves working with a debt adviser to negotiate lower monthly payments based on how much they can afford. However, a debt management plan will normally require people to pay whatever available income they have left after payments to household expenses have been taken into account, so anyone entering a debt management plan should be fully committed to repaying their debts.”
