Bad borrowing decisions by young people can leave them with serious financial problems for decades to come, meaning that many are seeking debt advice from an early age.
The Personal Finance Education Group (Pfeg) have launched a new campaign in a bid to help younger people plan their finances with more confidence and to understand more about debt issues.
Wendy Van den Hende, chief executive of Pfeg, said: “Young people have to make increasingly complex decisions in a very sophisticated world and often at a very early age. They need all the help they can get.”
Research suggests that young people are not fully informed about financial products which could lead them into unaffordable debt, as the FSA (Financial Services Authority) reported that over two-thirds of young adults do not plan ahead when it comes to money matters.
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The credit crunch is the perfect time to get your debts in order. As money gets harder to part with, it is important that you are not spending money when you don’t have to.
Start with your insurance premiums, as research by Fool.co.uk says that the average person pays over £1,500 a year but do not understand what they are paying for or how well they are covered.
Head of finance at the site, David Kuo, said: “The key to buying insurance is only to insure against risk that you cannot afford to bear. So, if you buy insurance you don’t need then you are wasting money. But if you don’t buy insurance that you do need, then eventually your decision will come back to haunt you.”
More than a quarter of those who look into buying insurance through the website do so to reduce their spending and take tighter control over their debt management.
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The credit crunch is squeezing our finances from every angle and new research has suggested that we are in danger of being unable to afford prescription costs, which now stands at £7.10 per item.
Prescriptions are free in Wales and will be free in Scotland from 2011, but there are currently no plans to roll this out to patients in England. The Department of Health committed to consult on the issue of prescription charges in July 2007, but no further progress has been made.
Debt worries mean that almost a million people have gone without their prescription due to the cost. Citizens Advice report that around 800,000 people last year did not pick up their prescription for this reason alone.
David Harker, Citizens Advice chief executive, commented: “While the Government has been dragging its feet over tackling this issue, nearly a million people have gone without the prescriptions they need because of the cost.”
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Almost 4.1 million British households have been forced into debt due to the rising cost of living, in the last year alone. A study by moneysupermarket.com reveals that 7% of UK households have took out some form of loan or line of credit in order to meet basic living costs.
What makes these stats look even worse is that £30billion worth of mortgage deals are due to come to an end throughout July, which is likely to cause debt problems for many more households as they face higher mortgage payments.
If you find that you having to borrow unsecured debt in order to fund the basic and your mortgage payment, you need to seek debt advice. One Advice can offer free debt advice to help you deal with your debt levels, no matter what your personal circumstances are.
Tom Moss, head of loans and debt at the site, commented: “Having a roof over your head has to be your top priority but to be funding that with a loan you might default on or with a credit card that will eventually charge you interest of over 15 per cent isn’t the solution in the long term.”
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There is no doubt about it, with the cost of living on the rise and £165 million pounds worth of school loans taken out for schooling fees last year, it is important that all parents keep an eye on their debt levels.
Within the next three years, a single parent with a child as young as seven could be forced into work or risk further debt management problems, as the government transfer their income support into jobseekers allowance. Currently a single parent is able to claim income support for a child up to the age of twelve years but by 2010 this age will be reduced to seven.
It is likely that more single parents will have to seek debt advice as the rise in every day expenses, such as food prices and fuel bills, means it will be very difficult to survive financially if income support stops being paid. It is estimated that the cost of raising a child from birth to the age of 21 is more than £180,000.
Chief Executive of the Child Poverty Action Group, Kate Green, comments: “Taking money away from families who are already poor, will simply increase poverty and many children will have their health and well-being put at risk.”
5 Debt Advice Tips for Single Parents
1: Check your Benefits
The benefits system is designed to help you and it is important that you are claiming for everything that you can. It is estimated that people across the UK are missing out on more than £8 billion pounds a year in tax credits and benefits, so make sure that you are not one of them. There are many ways that you can see what benefits you may be eligible for, try the online benefits calculator at http://www.entitledto.co.uk.
a) Income Support:
Income support is based on your employment status and is available to people between 16-59 years old who are on a low income and are working less than 16 hours per week, or are unemployed. For more information and to see if you can claim for income support, please get in touch with your local Jobcentre Plus Office.
b) Child Benefit:
This is a government funded benefit which is paid for each child and is not determined by your employment status or savings. You should be eligible if your child is under 16, 17 and under and has registered to work/train with the Careers Service or Connexions Service, or if they are under 19 and in full time education. For more information please contact your child benefit office.
Even if you have a job and your child is in college, they could qualify for Education Maintenance Allowance which means that they could earn an additional £30 per week.
2: Budget
It is important that you set a realistic budget for your household and stick to it. Although it might be hard to do at first, it is one of the best ways for you to control your outgoings and your debt levels. This way you should also be able to set aside extra funds for birthdays and Christmas, so that you don’t find yourself going without.
3: Switch Your Suppliers
There is no use being with a company who do not offer you value for money, and switching to a more cost efficient plan or a new supplier could save you hundreds of pounds. Although it might sound like a bit of hassle to change, it is a simple process and worth the extra effort as companies often offer the best deals to new customers.
Think about the areas where you can save money, such as broadband, telephone line, gas provider, electricity provider, digital TV etc.
4: Avoid further debt
When your finances are getting out of control, many people think that a short term solution is to take out credit cards or an unsecured loan so they can afford to pay for their current debts. But using one form of debt to pay off another can be a vicious circle of debt which is often hard to break.
Always try and avoid making payments or purchasing items with credit or borrowing additional money if you don’t need to. If you must take out further credit for an expense that you cannot avoid, then try to make sure that you pay it off the following month so you are not stung by high levels of interest. Try to avoid store cards at all costs, which have been described as the debt “devil” due to their extortionate interest rate.
5: Take Debt Advice
If you are struggling with debt then please feel free to get in touch with One Advice. No matter what your situation, we are here to help. We can speak to your creditors on your behalf and try to negotiate a lower monthly payment to your unsecured debts. You might find that paying less to your unsecured debts means that you have more money for household costs and your secured repayments, such as a mortgage or hire purchase.
Free Debt Advice for Single Parents
If your debt levels are becoming a struggle, then it is important that you seek expert debt advice. One Advice have a strong team of professional debt advisors, and we will help identify a debt solution which is right for your financial circumstances.
Recent research has reported that single parent families are being forced into loans with doorstep lenders, as they are struggling with debt and are often turned down by high-street banks. The One Parent Families charity reports that three-quarters of single parents are using credit to manage their finances, and 40% admitted that they are “always in debt”, compared with 28% of couples.
If you are a single parent struggling with debt levels, then maybe you do not need to take out more credit but instead make the debt that you have much more manageable to you. This is how One Advice can help, our team of expert debt advisors will go through your financial circumstances and help you to find a debt solution which is right for you.
There are a number of debt solutions which you might want to consider, including:
- Debt Management Plan:An informal agreement between you and your unsecured creditors, where you agree to repay a reduced amount to your debt. As part of the debt management plan, you make one payment to us which we will fairly distribute between your creditors. We will also negotiate on your behalf to try and stop any additional interest and charges being added to your debt, but this cannot be guaranteed.
- IVA: Like a debt management plan, an IVA allows you to make a lower monthly payment to your creditors but comes with added benefits. An IVA is a legally binding contract between the debtor and their creditor and is the only debt solution (besides bankruptcy) which can write off any part of your debt. All interest and charges are automatically frozen and you only repay the debt that you can afford to. You will make an agreed monthly payment over a period of 60 months and any unaffordable debt is legally cleared at the end of your IVA term .
No matter what your personal circumstances or your level of debt, One Advice can find a debt solution which will suit your needs.
For free debt advice, call One Advice on 0800 019 5870 or take the 1 Minute Debt Test.
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Suddenly finding yourself out of work would leave only 52 days until the average Brit has run out of money. This research by the Yorkshire Building Society highlights how debt-ridden Britain is, as we are shunning our savings plans in order to afford day-to-day living costs.
Monthly outgoings average at £1,445 but the average Brit only has £2,474 in accessible savings.
More worryingly, 36% admitted that they had less than £500 saved, which equates to just 11 days living expenses before they would have to seek debt advice as they have simply run out of funds.
Tanya Jackson, corporate affairs manager, said: “Finances for many are already finely balanced due to the rising cost of living and the research reveals that both state benefits and savings are not viable options for the majority of consumers to rely upon for an adequate length of time.”
Those most vulnerable were divorced people who had a savings pot which would last them approximately 35 days, followed by part time workers and young people. Widowed people could survive the longest, averaging at 120 days before they would have to worry about getting into debt.
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Rising living costs have stripped out any increases in pay, and the average family is £9 a week worse off than in 2007.
The average wage has increased by £22 a week during the past 12 months but this additional income has not improved the standard of living for the majority of Brits. Indeed they are more likely to need to seek debt advice as the typical family now has 6.5% less money to spare, averaging at £131 per week.
This research, by supermarket group Asda, shows wages have increased by 3.2%, but the cost of living has increased by 6.8% for items such as food, utility bills and petrol prices.
Chief executive of the group said: “Our latest report shows clear evidence of the squeeze on real disposable incomes.”
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Credit cards and loans are becoming more of a lifeline for many households struggling with debt, as new research shows that many are getting into more debt through unsecured borrowing just so they can keep up with the rising costs of living.
There is now double the amount of people who are struggling with debt and their financial commitments, compared with two years ago. 4% of Brits admit that they are struggling to keep control of their debt levels and have already missed payments to their creditors.
Senior finance analyst at Mintel, Toby Clark, said: “There has clearly been a deterioration in people’s perception of their financial situation over the past two years, as rising interest rates and higher living costs have really started to take hold.”
In the survey there was a drop of 13% of people who believe that they are still comfortable with their financial situation. Yet it revealed that almost half the population (46%) have some form of unsecured debt.
Are you Struggling with Debt?
If you find that the credit crunch is taking hold of your finances, then it is important that you seek debt advice before your finances get any worse.
One Advice are here to offer free ethical debt advice. So even if you are considering bankruptcy or have missed a couple of payments, we can help. Our debt team are fully trained and will talk you through your finances to help to find the debt solution which is right for you.
Our debt solutions include:
- IVA: An IVA is a legally binding agreement between a debtor and their creditor. The debtor agrees to make realistic payments to their unsecured debts for an average period of 60 months. At the end of the IVA term, all unaffordable debt will be written off.
- Debt Management Plans: A debt management plan is an informal agreement between a debtor and their creditor. As it is an informal contract, it can offer the debtor a much more flexible financial plan. One Advice will negotiate a lower monthly payment to your debts that you can afford.
- Bankruptcy Advice: One Advice believes that you should explore your other debt solution options before you consider bankruptcy. So if you are considering declaring yourself bankrupt, please get in touch as we might be able to find you a debt solution with less financial and personal risks.
For free debt advice, please get in touch with out One Advice team. Call us on freephone 0800 019 5870 or take the 1 Minute Debt Test to see your potential debt solutions.
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As debt struggles become a way of life for many people, the number of bankruptcy orders and Individual Voluntary Arrangements (IVAs) are expected to rise this year, according to 70% of Insolvency Practitioners (IPs).
The survey, by trade body for insolvency professionals R3, revealed that 68% of IPs predict that we could see the jump in the number of people declaring insolvency within the next six months.
The effects of the credit crunch are already taking a grip as the need for debt advice increases. A third of those surveyed said that there has already been an increase in the number of people who have fallen behind with their debts in the past three months. This jump is being blamed on the reliance of debt in order to afford the cost of living and that being in debt has become a way of life for many.
It is not only personal insolvency which is predicted to rise, as 90% of IPs are expecting to see an increase in business insolvencies during the next 12 months. Nick O’Reilly, president of R3, said: “Out of those, construction, retail and leisure are looking especially vulnerable. The fact that nine in ten Insolvency Professionals in the UK believe that in 12 months time they will be dealing with an increase in business insolvencies indicates we are unfortunately in for a long period of protracted pain. Our results show trends months ahead of official national statistics.”
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Millions are risking bankruptcy as homeowners are seeking out loans in order to make mortgage and rent payments. As the cost of living is continuing to rise and £30 billion worth of fixed rate mortgages are due to expire within the next month, it is likely that many will need to seek bankruptcy advice in order to regain control of their finances.
Research from MoneySupermarket.com reveals that 1.8 million households in the UK are getting themselves into more debt by taking out unsecured loans so that they can afford their rising mortgage or rent costs. A further 2.3 million people have increased their spending on credit cards as the credit crunch begins to pinch.
Tim Moss, head of loans and debt at the website, said: “It’s a very serious situation when you have people turning to a short-term solution to fund a long-term product. Having a roof over your head has to be your top priority but to be funding that with a loan you might default on or with a credit card that will eventually charge you interest of over 15% isn’t the solution in the long term.”
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Debt worries are a problem for both parents and their student children, as both vastly underestimate the amount of debt for the average university graduate.
In the research from the Association of Investment Companies (AIC), parents estimate that the average graduate debt levels are just over £9,600, whereas this figure is more like £13,000. Parents are more likely to be seeking debt advice as three quarters of parents admit that they are struggling to fund a university education for their child.
However it is likely that graduates are going to struggle to become debt free as university graduates of the future could leave with over £20,000 worth of debt, due to rising costs and top-up-fees. 23% of students said they know that will probably be paying off student debt for at least 15 years after graduation.
Communications director of AIC commented: “The credit crunch and the rising cost of living will undoubtedly make it harder for parents to fund their children’’s university years. Whilst there are many benefits that come with a university education, on graduation many young people find themselves struggling to repay their debt.”
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Worried that your children are getting you into debt, whether it be kicking a ball through your window or drawing on your freshly decorates walls? You are not alone, as £229 million worth of damage to UK homes is caused by children each year!
TescoCompare.com have revealed that 41% of homeowners have not taken out insurance to cover this type of accident, meaning that they could find themselves in debt when it comes to making expensive home repairs.
Paul Baxter, from the site, warned about the risks of not having your home properly insured and said: “With children at home during the holidays the likelihood for accidents to happen increases - and if you aren’t covered for accidental damage to your possessions it isn’t too late to add this cover to your policy.”
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Families are facing more potential debt problems as the average UK family is set to spend an extra £1,000 on food shopping a year, according to new research. The cost of food has risen across the top supermarkets, meaning that families are having to tighten their belts during the credit crunch in order to stop themselves falling into further debt.
Mysupermarket.co.uk have revealed that the average trolley price has risen by 21% in the past 12 months alone. They researched 24 staple items such as fruit, bread and pasta. Dairy and wheat products have seen the biggest price increase, with six pints of semi-skimmed milk rising from £1.68 to £2.12.
Johnny Stern, director of the site, says: “We would advise shoppers trying to stick to a tight budget to look out for better-priced like-for-like items and special offers within the supermarket you already shop at - there are significant and regular savings to be had to combat the crunch.”
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All of us long to become debt free, and money website fool.co.uk have predicted that 47 is the magic age! This figure represents the average age when the number of people without any unsecured debt surpasses those people who are in debt.
The antithesis of becoming debt free is at the age of 28, where over two thirds of UK adults (66%) have credit card debt. This number is likely to decline to about half the population by the time we reach our mid-thirties.
The forties are the most critical years in our life for those to be seeking debt management advice. Approximately 17% will be half way through their mortgage term and 22% will have an additional form of borrowing on their home, such as a debt consolidation loan.
There are other perks of being in our forties, as this research predicts that 41 is the age where our salary peaks, meaning that we can effectively tackle our credit card debt and enjoy becoming debt free.
David Kuo, Head of Personal Finance at Fool.co.uk comments: “It only takes a minute to whip out your card and get into debt, but getting out of debt can take years. And after the gloom of finding that our forties and fifties won’t bring us the endless salary rises we hoped for, it’s nice to see light at the end of the debt tunnel, even if it’s only when we reach 47.”
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Economic struggles in the UK has led to 60% of us to prioritsing cutting back on unnecessary spending above anything else, according to research from GoCompare.com. This came above saving, moving home or contributing to a pension.
Many of us are worried about getting into debt, with the rising costs of living and tightened lending criteria meaning that more and more people are seeking debt advice. The survey, which polled over 1,000 people, found that almost half (49%) are either concerned or very concerned about their finances this year and beyond.
Those which were most concerned about their financial worries fell within the 16-24 year old category (65%), which would reflect those who are struggling with education debts and trying to get their foot upon the property ladder.
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The average Brit would not be able to afford any more hikes in energy bills, following claims that energy bills could soar as much as 40% before 2009.
86% of those surveyed by moneysupermarket.com said that they would not be able to afford any increases, and 40% admit that the credit crunch has already left them feeling stretched.
Paul Schofield, head of utilities at the site, said: “At a time when people are tightening their belts the prospect of energy price hikes is a daunting one - especially as only one in seven of us could afford more expensive bills.”
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Credit crunch times are hitting UK businesses hard, but the Tories have unveiled new plans to shake up current bankruptcy laws in order for companies to keep on running should they fall into financial troubles.
They are considering mirroring bankruptcy laws in the US, to create a ‘Chapter 11′ scheme. This will permit businesses to apply to court for protection from bankruptcy. The court will then look to reorganise the debts so that it can continue to trade. The court is also able to clear any of the companies debts.
Tory leader, David Cameron said: “The credit crunch has meant more companies are finding it hard to get the money they need to keep their business alive, that means one thing: more companies going into liquidation. And we all know what liquidation means: job losses.”
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The credit crunch has lead to the UK taking greater control over their outgoings as there is less disposable income to play around with. It seems as though the latest economic problems are leading to pets being turfed out of their own home.
New research by Friends of the Animals charity shows that, although only part of the problem, the increase in the number of homes facing repossession has lead more families into rented accommodation where pets are simply not allowed. Last year there were 27,000 repossessions, but the Council of Mortgage Lenders forecast there to be around 45,000 in 2008.
Eileen Jones from the charity, said: “In the past year especially we have witnessed a sharp increase in the number of dogs coming into rescue. Reasons given for those handed in are varied including home moves and finances.”
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Tightening our money belts is becoming a common UK past time, but worryingly 1 in 10 Brits have admitted to turning to their savings accounts in order to pay off high energy bills and ward off debt.
Further research by the Chelsea Building Society show that 13% of those surveyed have raided their savings in order to meet their accommodation costs, including rent and mortgage payments. More people may need to seek extra debt advice as almost two-thirds of those polled said that they have seen a noticeable increase in the cost of food during the last three months alone.
Darren Stevens, director of customer services at Chelsea Building Society, said: “We are concerned that many people’s finances are in real trouble due to the growing pressure of rising costs across so many essential items.” However it seems that we are prepared for these prices to keep increasing, as 80% expect the cost of food to increase and 77% expect energy prices to rise.
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Charities could soon suffer from the credit crunch as Britain is becoming more frugal. Research by nfpSynergy shows a direct correlation between GDP (Gross Domestic Product) and charity income since 1980.
It shows that charities have had a dip in their donations when the average disposable income has fallen. Although charities have not reported a drop in donations yet, there is an average of 15 months between the drop of disposable income and charities.
Jonathan Baker of nfpSynergy commented: “Some charities have done well during a downturn, perhaps by being very efficient and tightening their methods.” But are advising people to be aware of this trend.
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25,264 people have declared themselves insolvent (meaning that they have filed for bankruptcy or an IVA) in the first three months of 2008, this is a rise of 1.7% from the end of 2007.
This won’t be a surprise to many people as there has been a lot of financial doom and gloom so far this year, such as the rise in shopping bills, utility bills and petrol costs. Recent research has shown that, on average UK households are 15% worse off compared to only a few years ago.
uSwitch.com predict that the number of people declaring themselves insolvent could rise to 101,056 by the end of the year. There are many reasons why people might declare themselves insolvent through declaring themselves bankrupt or writing off unaffordable debt with an IVA. Reasons for insolvency can include losing a job, unexpensive expenses or not being able to cope with the increases costs of living. Reports suggest that 292 people will declare themselves insolvent today alone, a figure which should send people seeking additional debt advice.
Ann Robinson, Director of Consumer Policy at the site, comments: “At the moment, consumers are being hit from every angle with price hikes across all areas from energy to mortgages right down to a 25% increase in the cost of petrol. This may be making many people feel that their finances are simply out of control. If people find themselves in financial difficulty the worst thing they can do is ignore the problem and hope it goes away. It won’t.”
One Advice offers Free Insolvency Advice
If you are worried that you may have to declare yourself bankrupt or you are having serious money worries, please get in touch with our expert One Advice debt team on 0800 019 5870.
We are on hand to help you with your finances and to deal with your money more effectively. There are ways that you can control your debt without having to declare yourself bankrupt, options include:
Debt Management Plans: This is an informal agreement between the debtor and their creditors. We arrange a smaller monthly payment to your debt which is based on what you can afford. Some creditors are also willing to freeze interest and charges on your debt.
IVA: An IVA is short for Individual Voluntary Arrangement. It is a legally binding agreement between the debtor and their creditors. An IVA has the distinct advantages that you only repay the amount of debt that you can afford, everything else will be written off on completion of your IVA. Typically, you will make agreed monthly payments for 60 months and interest and charges on your debt is automatically frozen.
For free advice about the range of debt solutions available, feel free to get in touch with the debt team at One Advice. We will help you to go through your finances and try and find the debt solution which is right for you.
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UK credit card holders could add a further £253.6 billion pounds worth of debt, if they chose to spend up to the limit on their credit cards.
MoneySupermarket.com have these released figures which show the potential debt levels if Brits were to max out their credit cards. Britain already owes over £55.5 billion pounds of unsecured credit, but this is small change compared to the extra £198 billion which could be spent! Four million people have access to £20,000 or more in credit available.
Head of credit cards at the website, Steve Willey, said: “The fact people could blow a quarter of a trillion pounds is alarming. This is surely a big wake-up call to all providers that they must take into account a person’s total potential debt when they apply for credit cards.”
He wants banks to take action on the alarming amount of credit that is available, as in many countries banks will only give out another credit card on the condition that the borrower closes their current one. Willey added: “To have a further £198 billion available to spend on credit is crazy. To put it into context, that is more than the Government spends annually on health and education put together.”
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Debt fears have hit the Bank of Mum and Dad as the credit crunch takes greater hold of their disposable income. According to research by Axa Insurance, the rising cost of living means that 17% of parents have cut back on children’s pocket money.
1 in 10 parents with children aged 16-18 have stopped lending money to their children, along with 1 in 6 parents who have children between 11-15 years old. Parents are trying to offer their children better debt advice, as one in five parents are encouraging their children to save their pocket money.
Alison Green of Axa said: “The bank of mum and dad has so far been quiet on the issue of how it will deal with the effects of the credit crunch.”
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Low income couples will find it “almost impossible” to afford to buy their own home, due to a mixture of high house prices and large deposits which are being requested by lenders.
The Royal Institution of Chartered Surveyors (RICS) have reported that a couple with a low income (£27,516 after tax) would have to save more than a 100% of their annual income (£27,738) in order to save up for a deposit. This figure is well up on the 21% of pay needed in 1996. It is now almost as difficult to get on the housing ladder as it was at the worst ever level, the third quarter of 2004.
House prices have increased an average of 10% a year since 1996, whereas the lowest incomes have increased by just 3.5%. But affordability has improved for those who are already on the housing ladder, and the credit crunch
David Stubbs, senior economist at RICS, comments: “With mortgage approvals declining, the picture does not look like improving in the latter part of 2008 and first-time buyers will find their path to home ownership increasingly blocked.”
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The yearly cost of running a car is set to almost equal the worth of a vehicle. uSwitch are warning that if petrol prices rise to the predicted rate of £2.30 per litre, the annual costs of fuel in 2009 will reach £3,800 alone. This is just £385 lower than the average cost of a vehicle.
This could lead to more people being forced to give up their car as they cannot afford to keep it going, as the yearly cost to run a car will represent 24% of the average net salary.
Ann Robinson, director of consumer policy at uSwitch, commented: “We are heading towards a situation where motorists are going to be priced off the roads. At £2.30 per litre a driver’s annual spend on petrol will soar by almost £2,000. Drivers are going to need to contend with rising insurance premiums and increased road tax as announced in the Budget.”
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