The UK government may be dragging itself out of recession – albeit slowly – but household debts are still crippling the population. According to reports, Briton’s debts have doubled in the last decade and nine million people are in serious financial trouble.
While the government is doing all it can to reduce spending, many of these changes are having a dramatic effect on the population. According to figures released at the start of February, up to 400,000 people have had liability orders issued after falling behind on bill payments since the government cut the council tax benefit by 10% last April. The looming prospect of interest rate rises is also a worry, particularly to low income earners, and could push many people into extreme levels of debt. The Financial Times reports that if the Bank of England increases interest rates to five per cent by 2018, nearly two million households will be in severe financial trouble.
But, it’s not just the global financial crisis that is to blame. Rising costs of living, stagnant wages and a culture where spending is encouraged over saving has left Briton’s in crisis.
With many people effectively drowning in household debt, or with the potential to be, finding ways to get out of it are few and far between. Obviously the quicker you can pay off debt, the better. But most households aren’t in a position to be able to increase the amount of debt they can pay off monthly. One option, which Zopa has provided a how-to guide for below, is to take out a debt consolidation loan. Effectively this means borrowing money to pay off all of your debts immediately. You’re then left with a single loan to repay, thus making your finances more manageable.
Other alternatives include coming up with a strict money management plan, which usually means prioritising the largest debts, ceasing credit card use and assigning a weekly budget. But it’s really what is going to work for you. The trick with money is to be smart. It’s as simple as that.