The Scale Of The United Kingdom's Personal Debt Problem

By: Nik J Jones

Latest statistics from financial education charity Credit Action show that the total personal debt of all individuals in the United Kingdom stood at a staggering £1.459 trillion at the end of April 2012. This amount is almost as high as the UK's entire Gross Domestic Product for the year 2011, and is almost 50 per cent higher than the UK’s National Debt. £1.252 trillion of this amount comprises mortgages and other secured debt, while the remaining £207 billion is unsecured debt. There is little doubt that the £2 trillion barrier will be breached in the coming years.

The average household debt stands at £55,483, and the average household debt excluding mortgages is £7,880 - this could include personal loans, car loans, hire purchase, credit cards and more. If one considers that a number of individuals have little or no debt, then it is clear that others are in significant debt and require help with debt problems.

There is also growing evidence that the UK population is experiencing increasing difficulties in dealing with its debt problem. Credit Action estimates that, every day, 314 people are declared bankrupt or insolvent; 1,473 County Court Judgements are issued and 105 homes are re-possessed.

Credit Action also reports that the problem is being made worse as spending power decreases. 1,880 people per day were made redundant between January 2011 and March 2012, while the cost of filling an average tank with petrol rose to almost £70.

The Consumer Credit Counselling Service estimates that 6.2 million households are 'financially vulnerable' in respect of their debt problems.

Much of the debt was accumulated prior to 2007, when credit was freely available. However, the global credit crunch has vastly restricted people’s ability to address debt problems by re-organising their debt. Re-mortgages are much harder to obtain, and the second charge secured loan industry is a fraction of the size it was five years ago. Second charge secured loans were heavily promoted in the past as a method by which consumers could consolidate existing debts.

If you are experiencing difficulties, whether you are seeking to manage large debts or a more modest amount, you should seek assistance without delay. Instead of worrying about the problem, call a professional debt adviser who can assess your situation and advise you as to the best way forward to help with debt payments. It may simply be a case of re-organising your household expenditure; or a repayment strategy such as debt snowballing might work for you. Alternatively you may be advised to adopt a formal strategy such as a Debt Management Plan, Debt Relief Order or Individual Voluntary Arrangement in order to provide help with debt relief.

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Nik Jones is a professional Debt Advisor at Debt Local. For any type of debt advice or debt management help, call for free on 0800 044 5659.

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