Are Levels Of Consumer Debt Out Of Control |
Posted: April 1, 2017 |
Headline after headline details the level of debt the country is in, and it only seems to be getting worse. Here we look at this issue, and what to do if you're one of the many in debt.
Headline after headline details the amount of debt a huge percentage of the country seems to be in. The main borrowing seems to be based on loans for cars, but personal loans are another big issue that seem to be tempting for many people around expensive times like Christmas. The problem is, with employment levels rising, and interest rates for a lot of borrowing being competitive, the ability to manage debt is actually quite high. People appear to be borrowing lump sums in order to have a large lump of cash right now, and then manage that debt long term easily. However, there is a significant proportion of the population that is not in this fortunate position and they may be tempted by guarantor loans, short term loans or bad credit loans. Yes even people with a bad credit history can obtain a loan relatively easily these days, albeit at a high interest rate. The risk with this situation is that the interest rates will keep the debt from ever being paid off, and worse, something will happen where the debt cannot be paid and the situation will get worse and worse.
How To Avoid Falling Into The Debt Trap If you have managed to avoid borrowing so far, one of the best things you can do is to sort out your finances now so you never need to borrow a lump sum, because if you have a less than perfect credit history (and many of us do) then you will pay a high interest rate to borrow. Get two lines of savings on the go - one for an emergency fund and one for treats. Ideally you will be able to replace the money in either when you take money out. Around £1000 is a great amount to have for emergencies like a broken washing machine, a failed MOT or any other issues that might arise where your spare cash for the month won't cover it. For your treat fund you can save as much as you like, but again a float of around £1000 is really useful for things like holidays. It is also a good idea to plan ahead for things like Christmas or MOT's so that you never feel tempted to take out an expensive short term loan.
How To Get out Of The Debt Trap If you are already in debt, there are lots of things you can do to get out of it. The first step is being honest with yourself and your situation and making a debt payment plan. The plan could be for ten years, five years - whatever you need to get that debt paid and at the same time improve any bad credit record you may have built up. Reach out for services like National Debtline or Citizens Advice if things are really dire and you need emergency advice and guidance. Otherwise, look at clever ways to consolidate all your debts into one monthly payment. You might not think you have much spare cash to pay the debt off and reduce the amount owing on your loan, but there are lots of ways to save money and make a little extra money as well, it just takes time and research.
Remember, your finances can be smartened up at any time, you just need to commit to an honest look at them, to get them on track for being much healthier, whether that means being debt free, or saving to avoid getting into debt in the future.
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