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Stressed Borrowing = Desperation

Today’s press is full of reports of Britain’s return to borrowing on credit cards and personal loans, however, unlike the orgy of spending during the pre-crisis years this recent spike in unsecured borrowing is a result of people being unable to pay for essentials – what is known as ‘stressed borrowing’. Some of the key facts are:

• Borrowing on cards & loans has been increasing over the last 7 months as households struggle to make ends meet.

• There was an increase in borrowing on cards & loans of £629m in September compared to the August increase of £478m. The total figure for individual borrowing now stands at nearly £1.5 trillion.

• Borrowing on cards & loans is increasing at double the rate of mortgage lending, suggesting that people are turning to credit to get through the month. This is backed up by research from Shelter

 

Stressed borrowing = desperation

I myself am no stranger to stressed borrowing, having overspent on cards and loans and then finding myself in the dreadful position where I had to resort to credit card borrowing to get through the month. This awful vicious circle – involving endless anxiety, sleepless nights and stress – where debt spirals out of control, inevitably leads to a full blown debt crisis and is something I documented in my book. Whatever the cause of your stressed borrowing it is essential to face up to the reality of the situation: borrowing on cards and loans to pay for essentials and get through the month is a sign that things are out of control and you are only compounding your situation by continuing to borrow.

 

What to do?

If you are borrowing to get through the month then clearly you have a problem and need to do something about it – your situation will not improve if you fail to confront it and do nothing. Be decisive; today is the day you are going to regain control of your life.

Can you negotiate a move favourable repayment plan with your creditors? Is this even a realistic proposition? Perhaps you are a mini-Greece and no amount of restructuring is going to help, as you would simply be delaying the inevitable and enduring miserable living conditions in the process. So investigate different forms of insolvency: Debt Relief Orders, IVA’s or Bankruptcy.

Whatever your situation, it is vital that you DO SOMETHING ABOUT IT! Your life will not improve until you do. The best thing I ever did was confront my problem and take a decision. Think about how good it is going to feel when you do hit on a solution and think about how you’ll feel on that day when you are finally debt free…

 

Help! I’m in trouble – Where to go for debt advice

If you are struggling to get through the month or worried about debt then I would suggest trying the Consumer Credit Counselling Service’s ‘Debt Remedy’ online advice facility, as well as encouraging you to look at forums on the Consumer Action Group website, specifically ‘Debt’ and ‘Banks & Credit’.

Never pay for debt advice as there are plenty of charities and forums that will give you the same information without seeking to profit from your situation.

 Please do not be alarmed, I am not about to start a ‘Politician of the Week’ feature – once you’ve been ‘Clegged’ faith can never be fully restored – but I was nonetheless heartened to learn of MP Andrew Percy’s remarkably candid revelations about his own problems with debt during a Commons debate (on the Finance Bill) earlier this week. Percy revealed to the House how he had repeatedly maxed out credit cards and is still saddled with enormous repayments. The MP said:

“I certainly understand having debts to the tune of tens of thousands of pounds.

In my case, it was credit card debt, and I am not alone in that. It started at university and I went down the line of paying off one credit card by transferring it to another on 0% for a year or a number of months before conveniently forgetting that and maxing out the one that I had just cleared. I now pay about £600 a month to clear all my credit cards, which I have had to roll into a loan since my election. I understand what debt is like and I know how once someone is on the conveyer belt, it is difficult to get off, and that is just with credit card debt.”

Aside from being evidence of the extent to which debt culture has permeated all levels of society, Percy’s statement shows that we at least have some Parliamentarians with first-hand experience of the harmful effects of the debt industry; if credit, or debt (as they are one and the same), is to be more tightly controlled in order to prevent people’s lives from being ruined, then this can only be a good thing.

Leading the charge

The specific subject of the debate was a proposed amendment to Clause 11 of the Finance Bill, relating to high-cost lending: that most damaging sector of the credit industry which consists of companies who lend at extortionate rates to those who cannot get credit elsewhere, including payday and doorstep loan companies that also target the most vulnerable groups. Only this afternoon I saw a TV commercial from one of these companies, Wonga, advertising a 4,500% interest rate.


Could a doorstep loan be the answer to your problems?

 

 

Also deserving of special mention was the leading voice on the subject, Stella Creasy MP, who has been ardently campaigning for greater regulation of the high-cost credit industry for some time. Creasy told the House:

“the companies have specifically said that the lack of regulation in the UK compared with other countries makes it a target market for them.”

And,

“…in its ‘Keeping the Plates Spinning’ report, Consumer Focus estimates that payday lenders are expected to quadruple the scale of their operations in the UK in the next few years alone.”

Business as usual

Typically – in accordance with le libéralisme sauvage, which despite the crash and its fallout, shows no signs of being supplanted as the ruling ideology in Britain – those suffering most in these hard times are being pummeled for profit by the money-men and shareholders who operate these parasitic companies. Despite the best efforts of Andrew Percy, Stella Creasy and many others, the light-touch regulation mob prevailed and the motion was defeated by 273 votes to 228.

You can read the full text of the debate here.


 

This Friday sees the release of the annual insolvency tally for 2009, with more alarming statistics expected to highlight our ongoing struggle with over-indebtedness.

Did you make the 2009 Honours List?

As a result of our appetite for credit, and the bank’s willingness to feed it, individual insolvencies in England & Wales have more than doubled since 46,650 people were declared insolvent in 2004. 2008 saw a total of 106,544 people either declared bankrupt, or using Individual Voluntary Arrangements to reduce their debts, (an increase of 128% in four years).   

Figures for the first three quarters of 2009 suggest that the past year will be another record-breaker, with at least 130,000 people expected to have been declared insolvent.

The 2009 figures would surely be much worse, were it not for artificially low interest rates, which are currently enabling many to keep their heads just above water and remain solvent. With 2010 likely to see these extraordinary measures gradually being removed, record bankruptcies will continue to make future headlines.   

The 2009 insolvency figures will be released by the Insolvency Service Friday 5 February 2010 at 9.30 a.m.

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