One million have problem unsecured debt

This week TDX Group released a report showing the extent of the debt situation that the UK is in. While Credit Action compile detailed monthly debt statistics that show the state of affairs, this report serves to further highlight the reality of the predicament that we find ourselves in.

The report’s key finding is that one million people in the UK have ‘problem’ unsecured debt. With economic circumstances becoming gradually more precarious, it predicts that many more will face financial difficulties in the coming months.

However, it is still by no means certain that a prolonged period of slow or negative growth is inevitable. But if the economy takes a turn for the worst it is better to be prepared than to be left stranded without any means of escape.

Now is the time to get your personal finances in order. The first thing to do is to get a good idea of how much money comes in every month (income) and how much you spend (expenditure). Use the Moneybasics Spendometer – a mobile phone budgeting tool – to keep track of where you money is going. Print off, or copy down from the sheet, and then modify a Budget Sheet to keep track of income and expenditure. This will also help you to know how much we are able to spend on different things each week and whether your present spending reflects your priorities.

Look for ways to increase your income, e.g. sell infrequently used CDs and DVDs on secure online secondary markets, such as EBay; and ways to cut your costs, e.g. make a packed lunch everyday instead of buying it when you are out.

If you feel like it is too late already – for example, you have stopped opening letters from creditors – you are choosing to believe a lie. Sorry, but that is the truth. It is never too late to get yourself sorted, there is always a solution. The sooner you choose to get help, the sooner you can be free of the burden the serious over-indebtedness.

Get in contact with a free, independent debt advice charity for help. Call the Consumer Credit Counselling Service (CCCS) on 0800 138 111, National Debtline on 0808 808 4000, visit you local Citizens Advice Bureau or use online debt counselling. It doesn’t matter which of these you use, just don’t let your debt take control of your life.

On that hard-hitting note, please read on for a summary of the top personal finance news stories for the week commencing 14th April 2008.

Tuesday 15th April

Inflation unchanged – Consumer Price Inflation (CPI), the Government’s official measure of inflation, defied the widespread expectation that it would rise in March by staying at its February level of 2.5%. While this remains above the Bank of England’s medium-term inflation target of 2%, the fact that it didn’t rise helps to provide more flexibility for the Monetary Policy Committee in setting interest rate. It gives them more freedom to cut the base interest rate again in May and the coming months. Without the flexibility to cut interest rates, UK economic policy workers lose out on a key way of stimulating the economy away from a downturn, so it’s great news that inflation didn’t rise.

Wednesday 16th April

Credit card costs rise – In spite of the fact that the Bank of England’s Monetary Policy Committee last week lowered the base interest rate from 5.25% to 5.00%, this week reported that the average costs of keeping unpaid balances on a credit card is rising.

The average Annual Percentage Rate (APR) on purchases – where the bill is not paid in full every month – has increased to 17.12%. This makes it more expensive to borrow on your credit card. For example, if you have an outstanding balance of £6,000 at the end of a month, on average the interest that you will have to pay for that month is now:

=Outstanding balance x (APR / number of months in a year)

=£6,000 x (0.1712 / 12)


To find out more about the costs of having a credit card, visit: How much Does a Credit Card Cost?

Thursday 17th April

House price warning – Analysts at Morgan Stanley, a leading investment bank, have forecast that house prices will fall by 10% in 2008 and 5% in 2009. If this were to be the case, there is a possibility that up to 10% of mortgage owners – 1.2 million borrowers– could slip into negative equity.

Negative equity occurs when a person’s home is worth less than the value of their mortgage.

For more information about mortgages, have a look through Moneybasics. For example, there is section that explains the main Types of Mortgages available on the market.

Prepared for Moneybasics by Jason Taylor, Advocacy Officer (Credit Action).