A recent report from accounting firm PricewaterhouseCoopers has said that UK households remain “among the most indebted in the world”, despite three years of net repayments.
In 2011, the average UK household paid down £355 of unsecured debt, but the average household debt (excluding mortgages) is still nearly £8,000. The report also highlighted “worrying” signs in spending habits, such as the fact that a quarter of 25 to 34 year olds used credit to pay for essential goods in 2011.
Meanwhile, average incomes fell by nearly 3.5% over the same period, squeezing budgets at a time when the cost of living has been rapidly rising. This has left UK citizens more vulnerable to debt problems, particularly if they are made redundant.
However, there are plenty of things that you can do to help to bring your debts under control before they start to cause real problems. Cutting back on luxuries, taking on additional work, and setting out a clear and rigid household budget can all help to free up the funds required to pay down debts quicker.
Another option that might be worth considering is to make use of a debt management service. These companies provide long-term, low-interest loans that can be used to pay off all of your unsecured debts so that you only have one manageable monthly repayment to worry about.
There are several advantages to embarking on a debt consolidation programme. For starters, it means that you don’t have to keep track of all your personal loans, credit card repayments, and overdraft fees any more. This makes it much less likely that you will miss a payment on one of your credit sources and be hit with a late payment charge.
Missed payments can also negatively impact your credit rating, which could result in higher interest rates in future, and may also prevent you from being able to obtain credit in the future. Taking out a debt consolidation loan to pay off all your unsecured debts could help to repair your credit rating, as it will mean that all your outstanding debts are repaid and you can start to build up a track record of consistent repayments.
Perhaps the main advantage of consolidating your debts is that it can reduce the amount of money that you have to spend every month servicing your debts. This makes you much less vulnerable in the event that you should suffer a sudden drop in income, such as losing your job. This can provide priceless peace of mind at a time when the economy is looking decidedly shaky.