Tuesday, May 19, 2009
Category:
Consolidation
According to Unbiased.co.uk, 2008 saw a shift from saving to debt repayment - this comes as a result of the advice website’s new ‘Savings Brake’ research.
At the beginning of last year the level of borrowing stood at 66 pence for every pound saved, and savings peaked at £36 billion in quarter two. In contrast the public was repaying £1.76 for every pound saved during the final quarter, and savings had virtually halved to £19 billion.
The total amount of non-mortgage debt repaid by Brits throughout the year equated to a substantial £38.6 billion, which exceeded the amount borrowed in 2007 and 2008. This occurrence was the first of its kind during the course of Unbiased.co.uk’s eight-year study.
This eight-year Savings Brake study involved a comparison between the amount borrowed and the amount saved by Brits, excluding mortgage debt. The results concluded that for every pound saved in 2008, 37 pence went towards repaying debts. On the whole, nationwide savings in excess of £103 billion were made, which represents a 30 percent drop on the previous year’s figure of £146 billion.
Despite these findings, debt repayment would not appear to have been at the forefront of minds throughout the entire 12 months of 2008; highlighted by the fact hat £23 billion worth of new debt was taken out during the first half of the year. The final six months saw the behavioural shift when debts to the value of £61 billion were repaid by the public. Hand-in-hand with this came a reduction in the level of savings, which reduced by 45 percent from £67 billion in the first half of the year to £37 billion in the second.
Chief Executive of Unbiased.co.uk, David Elms, commented: "2008 was a year of two halves in terms of people's financial behaviour. The financial turmoil which hit Britain last summer prompted a dramatic retreat from savings in favour of starting to pay down personal debt. This shift itself is no surprise, but its severity confirms the historic impact of the credit crunch on consumer behaviour and evidence suggests this repayment trend is continuing at pace."
"There is an awful lot of consumer fear and confusion out there right now, and it is vital people seek professional advice from an IFA to enable them to strike the best balance between borrowing, saving and other aspects of their finances throughout these difficult times."
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Homeowners that are looking to organise their debts may wish to consider taking out a debt
consolidation loan. By tying up existing credit cards and store cards for example, the borrower would no longer need to juggle multiple and sometimes confusing, monthly repayments. In addition to this, the borrower could also find that with a debt consolidation loan, their new monthly repayment is less than current outgoings, thus freeing up useful money to be spent in any way desired. A debt consolidation loan is one of many finance options available to consolidate debt. However, it be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
