British Families and Debt
There is current concern from the Bank of England that British families are getting deeper into debt, however, it has been said that lenders are putting themselves at risk because people are now more willing to make themselves bankrupt.
Despite people already having significant amounts of debt, credit card companies are still prepared to lend these people money. This is a combination of a creditor not knowing the full picture of a persons financial commitments and employees of credit card companies being under pressure to sell credit cards and insurances policies to earn bonuses.
People will receive random telephone calls from companies who will try to sell the benefits of their cards and use the selling point of lower rates plus the option to transfer the balance from their current credit card at a lower rate.
Many people who receive these calls may already be in some kind of debt. There possibly will be some who are currently looking for solutions to their debt problems, and the temptation of obtaining a new card thereby having more spending power could prove hard to resist.
The Bank of England has every right to be concerned about the financial state of this country, but possibly the lending system needs to change to make it more difficult to obtain credit.
Lending companies blame the debtor, and the debtor blames the lending companies but who will stand up and make a difference when it comes to the huge family debts the UK are currently experiencing?
We have already been made aware that borrowing in the UK has crashed through the 1 Trillion pound barrier, but surely this should provoke concern rather than just being a headline in a newspaper.
The Government are concerned with raising financial awareness, however, what restrictions do the lending companies have? We know that a new Bill is currently in motion, which was first mentioned in the Queens Speech back in November 2004 and is set to come into effect in mid-2006. This bill will give creditors more rights over debtors rather than placing any restrictions on how creditors lend money.
Yet another case of suicide due to debt is circling the Internet. 43-year-old Mark McDonald's body was found on a railway near his home, with him was his rucksack containing 80 letters from his creditors regarding monies he owed which mounted up to £65,000. Mr McDonald is now the 5th known person who has taken his life due to debt in the last 2 years. Others include a 21-year-old farm worker who owed £10,500 and a 65-year-old grandad who owed £135,000.
If people were more aware of the free financial help that is available, perhaps they would realise that borrowing more money to pay off current debts is not the way to ease their financial situation. Debt Management Companies such as Payplan (http://www.payplan.com) offer free financial assessments and Debt Management programs which work around peoples current incomes to find the best solutions to debt problems, it is hardly ever necessary to borrow more money to resolve financial difficulties.
Perhaps there should be a system in place, which allows a lender to see whether or not a person can afford either a loan or a credit card before making a decision whether to lend money.
Creditors currently say that they will only lend money if the applicant meets their criteria. However, if people are still able to borrow money when they cannot afford to pay it back, then the criteria fails to give a true representation of whether or not the applicant is able to repay.
Information supplied through the credit reference agencies do not show the full picture to a lender when making a decision to lend money, either that, or the credit companies are not taking full advantage of the information provided.
Some lending companies will lend you without question half of your annual income, not taking into account what you already owe.
These are the things that need to be addressed when lending money. Both lenders and borrowers alike are responsible; therefore, tighter restrictions need to be applied on both sides.
We can only rely on the Government to recognise the problem, and do something to resolve the current state of lending and borrowing in this country. Debt in the UK crashing through the 1 Trillion pound barrier is not something to be proud of; it is something that needs to be addressed now!
Nicola Bullimore has been working with people regarding debt issues for a number of years. For more information, please visit Debt Questions website
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