Household debt is rising 10% annually | So what can be done?
The cost of household debt
Bank of England Stats are showing household debt has risen to its highest since the 2008 financial crash.
It is reported that personal debt which includes bank loans and credit cards (excluding mortgages and student loans) has been growing on a yearly rate of 10%.
Credit cards essential not luxury
The rising household debt is due to the rising cost of living, and where people used to use their credit cards for luxury goods they are now turning to them to pay for essential living costs. If people are finding it hard now, the bad news it will only get worse in 2017 with inflation expecting to rise this year.
Debts begin to spiral out of control, as the credit card bills begin to land on our doorsteps and if not paid charges start to build up.
Call to the government and lenders to help people recover from household debt
Many money advice charities are calling to the government and lenders to introduce a ‘breathing space’ scheme such as the Debt Arrangement Scheme which Scotland already has in place. This would allow people time to get to grips with their debts, without having extra charges added on.
The argument being that allowing people to enter into a debt management plan they are more able to pay back, also meaning that the lenders are far more likely to be paid. Currently the law in England, Wales and Northern Ireland you will only qualify for debt management plans if you are seriously close to becoming insolvent.
Household debt can be pushed over the edge
Many households are pushed over the edge by unexpected circumstances such as reduced working hours, pay cuts or job loss and illness, suddenly the main income stream which is being relied on stops or is significantly reduced.
Many households can be hit by unexpected bills, such as car repair bills, if you are unable to get your car fixed the likely hood is you will be unable to get to work. This is where bad credit car leasing comes in to its own, if you are unable to afford a new car and you have a bad credit score. After an initial payment you have set monthly repayments, which means you are able to manage your finances in a new or nearly new car, so less chance of the car going wrong.
Household debt where to go?
If you are a household in debt and need help look up Money Advice Trust, they run the National Debtline. The important thing is do not ignore the situation, seek help and start getting things sorted before you spiral out of control.