Debt report: don't ignore financial problems

15/06/2010

Debt report: don't ignore financial problems

Personal debt problems and bankruptcy could spread throughout the economy in a cascade of financial difficulties according to a new report by insolvency experts R3.

According to The Independent the study, entitled "Barriers to seeking advice", warned that young people were being enticed into debt by banks, but that they were then unable to deal with the consequences once things got out of control.

Debt can often spread beyond the initial person who is struggling as friends and family try to bail them out.

Things would be made much worse by a rise in interest rates, warned the report, as many businesses faced insolvency if the base rate was hiked.

The double blow of increased business loan payments and decreased consumer spending could be enough to send many businesses under.

R3 Midlands Chair Matthew Hammond, a partner at PricewaterhouseCoopers, told the Birmingham Post "To put things into perspective, the survey showed that 18 per cent of small businesses felt they would be facing insolvency should the interest rate rise to between 4 and 5 per cent."

It's likely that this could then have a knock-on effect causing redundancies and debt to spiral.

However the report said that hiding away from debt problems was not the answer and advised people to seek advice, something the study found that many people were reluctant to do.

More than a third of 18-24 year olds and 29 percent of 25-34 year olds had not asked for advice as they felt that it was "easier not to think about it"

"It doesn't take much to knock people off course," said R3 president Stephen Law, who is also a partner at accountancy firm Ensors. "Debt spirals out of control so quickly when people aren't making payments to cover the monthly interest."

An unnamed Citizen's Advice caseworker told the Independent that they thought that banks deliberately targeted the young "Faced with an old person in their forties or a young person in their late teens or early twenties, a bank will always go for the younger person. The bank will offer the younger person more in terms of an overdraft,"

But despite this the report found that debt problems still affected people from every generation.

If you're struggling with a large unsecured loan, then contact Clearstart today and find out how an Individual Voluntary Arrangement or a Debt Management Plan can help you become debt free. ADNFCR-3106-ID-19837124-ADNFCR