In 2010 The Joseph Rowntree Foundation conducted a survey on low income and debt. This was at the height of the recession, and although four years have passed since then, it feels like we’re all still struggling under the weight of it, with no time off for good behaviour.
Their research uncovered some unpalatable facts, in that it wasn’t that debt was caused by reckless overspending, but inadequate income. As young people settled down to start a family, credit was heavily relied on once they turned 18 to make ends meet, with formal and informal borrowing used sometimes to help support a growing family. Often, if couples split they often inherited their partner’s debt which added to their own, creating a debt trap that was difficult to escape. Those that didn’t marry were unable to leave their parents’ home and find a place of their own, either because they couldn’t afford a mortgage, or if they were lucky enough to find employment, their income was too low.
Triggers into debt amongst other things were moving in and out of low paid jobs with no consistent employment and in-between jobs, applying for benefits that were often delayed for many weeks. This type of habitual behaviour resulted in many Scottish people struggling severely with debts that they simply could not afford. Many people turned to Debt Therapy Scotland. They offer users a personalised debt profile that tells them if a Trust Deed or Debt arrangement Scheme is a suitable option to get out of debt quicker.
Expensive credit given to those who were in no position to pay it back was a serious issue and lack of savings was another, due largely to the fact that as people were between jobs they were unable to save. Consistent, regular well paid work was and still is the answer.
It was decided that greater regulation of lenders rather than limiting access to credit at all for those on a low income would help.
However 4 years on people are still finding it hard to sustain work, zero hours contracts aren’t helping, and high interest payday loans are still an issue. Banks have offered little or no support to small businesses and the self-employed, leaving people with little in the way of financial support. Campaigning for greater legislation has helped with regards to payday loans, but more needs to be done. Employment is still a problem with the figures remaining high for those under 25.
If you’ve found yourself in debt and you’re on a low income, then it’s likely that you’ve reached the end of your tether. You’ll have been inundated with media sound bites that insist it’s your fault you’ve got yourself into this position in the first place, trying to sustain a high maintenance lifestyle and accumulating unaffordable debt along the way. If you’ve had to spend some time on benefits, then no doubtyou’ve been made to feel even worse by the increasing bad feeling in the media towards those out of work.
You may take some comfort from the fact that the Joseph Rowntree foundation concluded their findings with this statement:
“This research suggests that the cause of over-indebtedness is not widespread profligate use of credit to get a high materialistic standard of living. More typically, the use of credit and accumulation of debt were because of persistent low levels of income, both benefits and earnings derived, often exacerbated by moving in and out of work.
They went on to conclude that:
“The overall picture that emerged is of people using credit to “smooth” income and expenditure flows. Subsequently, since their ability to plan and manage their finances was so constrained, other factors tipped them into problematic debt….”
That’s all very well, but this may not help with your debt problems. Perhaps the fact that we’re all in this together may offer you some comfort. According to the Scottish Daily Record there are one million Scots living in poverty right now. One in five Scottish people are on the breadline with no light at the end of the tunnel. Statistics suggest that for the years 2012 – 2013 many were struggling to simply get by once they’d paid their housing costs.
What you mustn’t do is simply bury your head and in the sand and go into shut down mode. Your debts won’t go away, the phone won’t stop ringing and the letters won’t stop coming.
Bankruptcy is not necessarily the answer and depending on where you live, a trust deed or IVA could be a realistic and sensible way of handling your debts. Speak to a trusted debt advisor, an expert who has the experience and credentials to back up what they say. It could be the answer you’ve been looking for and it needn’t affect your job either, if you’re in employment and you’re on a low income, a Trust Deed won’t take any money from you that you can’t afford to pay and they’ll ensure you have enough left over to live on.
Times are hard, but you don’t have to deal with it alone. There are people and places you can turn to.