1 Million “Problem Debtors” in Britain
1 million Briton’s have “problem debts” that they are struggling to pay, and the number of people facing serious debt problems could double this year. The estimates come from a report by the TDX group, and paint a concerning picture of the current situation for debtors in the UK. The report, titled ‘UK Problem Debt – consumer crisis or efficient market?’, goes on to state there are approximately £25 million of problem debts, averaging out at £25,000 for each of the troubled debtors. About 60% of this problem debt, unsurprisingly, is on credit cards, with the remainer on loans.
The more worrying statistic is one from the previous year. An estimated 58% of problem debtors tackled their debts through some form of refinancing last year, such as balance transfer, consolidation loans and remortgaging. This isn’t concerning in itself – in fact it is a positive sign that people were intelligently finding ways to control their debt without having to resort to more serious debt solutions. What is worrying is that this option isn’t really available anymore. Stricter lending has made the more favourable low interest loans and 0% credit cards hard to come by, and the problems in the housing market mean that remortgaging and equity release aren’t as straightforward as they once were.
Refinancing is one of the early measures that can be taken to curb serious debt long before a Debt Management Plan, IVA or bankruptcy becomes necessary. If this option is taken away from debtors, through tighter lending conditions and the withdrawal of useful products, then we will see a sharp rise in the number of people entering into insolvency in the months to come.
