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UK Debts are Eating into Salaries
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(10-03-08) - According to a survey undertaken by an independent financial advice site, it takes most Britons over two months’ worth of salary to pay off amassed yearly debts. writes Dan Drage dan.drage@consumerchoices.co.uk |
March 10th 2008 is officially ‘debt free day’, where most UK residents have earned enough to finally clear their credit card and loan balances. Last year’s ‘debt free day’ was recorded on February 1st, and the effect of the credit crunch on UK borrower's ability to repay their debts has not gone unnoticed.
David Elms, chief executive of survey protagonists Unbiased.co.uk, perceives this data as a stark warning:
‘Compared to last year we have spent almost two months longer this year to pay off the interest on our borrowings and this doesn't even take into account mortgage costs’
He continues:
‘In the current economic climate, it has never been more important for people to realise just how much it costs to service their debts and to ensure they have adequate funds available to do so.’
Personal loan debt is almost four times higher this year, rising to £9.8 billion from £2.6 billion, while interest rates on personal loans are 0.5% higher as the credit crunch takes its toll. In a nutshell, Britons are paying almost £1.5 billion in interest payments alone each year.
Chris Eagle, Commercial Manager at CreditChoices, hopes that the financial sector will be able to rebound and absorb this trend:
‘If this trend continues year on year, then by 2015 we’ll be working all year just to pay off debts, and that doesn’t even account for the cost of living. Hopefully, the credit crunch will ease and everyone will be given a little breathing space to repair their finances. Those who are paying interest on a credit card balance might consider switching to a 0% balance transfer credit card. Savings on interest payments are there for the taking.’
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