Tuesday, April 28, 2009
Category:
Consolidation
According to the Citizens Advice Bureau (CAB), many of the people that are turning to them for debt advice will never be able to pay off the money that they owe.
New research has revealed that CAB debt clients owe an average of £16,971 – two thirds more than in 2001. This figure represents virtually 18 times the total monthly income of typical households, which means an average repayment period of 93 years at an affordable rate.
The CAB has revealed that the volume of debt enquiries received has doubled in the last decade. With one in three of all enquiries being related to debt, this makes it the number one issue advised upon. CAB advisors are faced with an average of 7,241 new debt troubles each working day.
A thorough analysis of data from over 1,400 debt clients uncovered that practically one in three had fallen behind on their mortgage or rent repayments, or owed money on secured loans. Four in ten were also found to be experiencing fuel poverty, and a quarter had council tax arrears. More than half of debt clients were revealed as owing money on four or more household bills, which marks a 38 percent rise on 2004 when the previous research was carried out.
The number of homeowners with mortgage or secured loan arrears (45 percent) is up 30 percent from 2004, and two thirds of these would be in priority need for re-housing if they were to lose their homes. Close to one in three (30 percent) spent at least half of their monthly income on their mortgage, with one in five either having no equity in their homes or actually being in negative equity.
One in ten had a minimum of 10 credit debts such as credit cards, overdrafts and personal loans. However, over half of these people (58 percent) had no income available to them in order to pay these debts. This is a significant rise from 2004.
In terms of the causes of debt, the primary reasons were established as being low income, over-commitment, illness, disability and unemployment. In addition, irresponsible lending, inadequate financial skills and an increased cost of living were to blame.
Where affluence is concerned, CAB debt clients are generally poorer than the population as a whole. Their average net monthly household income of £1,021 is less than two thirds of the national average. Similarly, the average spent on housekeeping per week was only £69.50 compared to the national average of £142.
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Homeowners with mounting debts could consider consolidating these with a secured loan. A secured loan, one of many options to
consolidate debt could be used to pay off existing credit and store cards and may result in lower overall outgoings. When using a secured loan to consolidate existing debt, it should be remembered however, that consolidating your debt may increase the amount you pay back overall and extend the repayment period of your debts.
