Feeling Stressed about Poor Economic Times and Rising UK Consumer Debt? Here’s what to do

It’s been almost a decade since the deepest of the dark days of the 2008 housing crisis and its subsequent recession. While it may seem that the worst is over, let’s not kid ourselves. The recession has had far reaching consequences that will take many years to finally lay to rest.

If we were to be honest, we’d say that relatively few have been unaffected by the ravages of the past few years.

The large majority of the people have experienced a reduction in family income either through:

  • reduced work hours,
  • pay freezes or
  • job loss.

Wall street may rejoice at an influx of money and lower interest rates, but it’s the average joe on the stree that’s most affected by the current high rates of inflation. These are exactly the people who may benefit from debt advice.

Bankruptcy is still, thankfully, a rare event.

That being said, even one person having to face the throes of bankruptcy is too many. As if high inflation rates weren’t enough, the recent public spending cuts it will now fall on local and central government employees to face job losses and the subsequent pressure on making loan and mortgage repayments.

What can you do to avoid bankruptcy?

Fortunately there are many steps that can be taken before bankruptcy need even be considered.

The first step is to seek debt advice and get clued up on what actions can be taken to get back into control of the family finances.

This could take the form of a simple debt management plan where lenders are contacted and some form of reduced payment program is agreed upon. It may be that only a short moratorium is required to ease cashflow for a few months although lenders prefer at least some payments to be made in order to keep lines of communication open. More structured debt management plans may include involving a specialist debt advice company to negotiate the terms on behalf of the debtor. Their experience and knowledge of what may be achievable could save stress, time and, ultimately, money.

Correct your Money Habits

Sometimes people get into this situation due to poorer monetary habits as well. Just like governments, they spend profligately during the good times and therefore dont have enough saved up for the rougher times. A higher personal savings rate is recommended during the good times to build up this buffer.

Once debt has become a real issue and involves sums greater than 15,000, it may be necessary to look at a more structured debt management plan.

Individual Voluntary Arrangements (IVAs) were introduced to help those with serious debts avoid bankruptcy by introducing a legal framework for debtors and lenders to agree how to repay outstanding loans. Using the debt advice and services of a licenced insolvency practitioner, a debt management plan is agreed with lenders based on what a borrower can afford to repay over a typical 5 year period. If the majority of lenders agree, then a legal plan comes into effect and no more action can be taken to enforce loans against a borrower. Provided all the repayments are made on time as per the debt management plan then at the end of the IVA period, any remaining debt is written off.

The next few years will remain desperately tough for the economy with the prospect of high inflation, interest rates and unemployment. Earnings will remain tight so those with debt problems must act as soon as possible to avoid a vice like grip taking effect. The ultimate penalty for inaction could be bankruptcy and bankruptcy is not a good place to be.

Infographic on Consumer Debt by Quick Quid

Here’s how consumer debt looks like in the UK, the following infographic is brought to you by: QuickQuid.