The recovering economy may have encouraged people to increase their borrowing levels, but those who don`t stay on top of what they owe may ultimately require a debt solution to improve their cash flow, such as a debt consolidation loan.
Figures from the Bank of England show that borrowing through credit cards, overdrafts and personal loans increased by 6.4 per cent in October this year, compared to the same month in 2013. That rate of loan increase is the quickest since July 2006, long before the credit crunch became a factor.
The month saw £1.1 billion borrowed by consumers, compared to £942 million in September, as people no doubt started to turn their attentions to early Christmas purchases. The amount of outstanding unsecured debt in the UK now stands at a three and a half year high of £168 billion.
With the Bank of England bank rate staying at 0.5 per cent, some lenders have been able to offer cheaper rates in order to get people borrowing again, while the Office for National Statistics (ONS) has shown that high street prices fell by 1.5 per cent in October, further encouraging people to buy.
While borrowing money is an accepted and common place occurrence, for example the country itself borrows a lot, it can become problematic if your debt gets unmanageable, in which case you may want to think about getting a debt consolidation loan if you cannot reduce the deficit through cuts in expense or lifestyle sacrifices.
This can help to pay off what you owe in a more manageable way and improve your month to month cash flow by refinancing. The First Choice Finance in house adviser team will identify the most suitable loan for you from their products. It`ll be presented as a free quote and on a no obligation basis, so it could be worthwhile finding out a little more.
You can talk through your scenario with our finance team by calling for free on 0333 003 1505 or 0800 298 3000, if you prefer loans on line visit firstchoicefinance.co.uk to learn more about our debt consolidation options.
For those budgeting on a hand to mouth basis and using credit, problems could well arise when the Bank of England increases its base rate from 0.5 per cent, which is likely to happen sometime in 2015. Howard Archer from IHS Global Insight notes that having high debt levels `could cause problems for a significant number of people` when interest rates rise.
However, he adds that `the Bank of England has indicated that still high consumer debt levels are an important factor why it will only raise interest rates gradually over the longer term`. That means the base rate is only likely to go up by 0.25 per cent at a time, rather than half or full percentage points.
Even still, there could be problems and these may be exacerbated if lenders such as credit card companies do not treat their customers fairly, which are being probed by the consumer finance watchdog to see if they`re being fair to their customers.
The Financial Conduct Authority (FCA) is going to look into whether plastic firms make too much profit from consumers who borrow more than they can afford and don`t pay back enough to make the debts sustainable.
Financial rules seem to dictate that there must be a minimum rate at which cardholders pay back what they owe, but this could be as low as one per cent of the balance plus fees. As a result, somebody may be stuck paying just the interest off on a credit card debt, and even see growing interest, for years on end.
A debt consolidation loan could prove to be a better alternative that may end up cheaper than staying in debt to the credit card or loan firms. One way to find out is by contacting loan companies such as First Choice Finance and talking to finance underwriters who could help you get your debt back under control.
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