How Unemployment is Impacting Personal Debt in the UK for 2012

How Unemployment is Impacting Personal Debt in the UK for 2012

There are several issues that relate to personal debt in the UK. One of the greatest issues that people have involves how debts are rising as the unemployment rate in the country is going up.

Current statistics state that about 2.67 million people around the United Kingdom are unemployed. This has resulted in an unemployment rate of 8.4%. This is the highest rate that has been experienced since the 1990s.

In fact, the ability of people to find work has been a challenge. More than 800,000 people around the UK have been unemployed for at least twelve months.

This relates to personal debt in the UK because it involves a large amount of money being owed due to a lack of ability to get money from working. The total amount of personal debt in the UK has risen to be worth close to £1.5 trillion as of the end of 2011.

The interest that comes with this debt is especially difficult for many people to manage. It is estimated that people in the country spent about £170 million on interest payments every day in December 2011. This is a minor increase over what had been spent a year earlier. This may be influenced by Christmas expenses but at the same time it is a sign that people who have lost their jobs are having tough times with paying off their debts on time. They are being forced to pay interest only.

The worst concern for UK personal debt involves how younger people who may not be fully experienced with debt management are adding to this total. There are more than a million people between the ages of 16 and 24 who are unemployed. This results in an unemployment rate of more than 20% for this age group.

This is an issue for personal debt because people who are not able to find jobs are often more likely to suffer from more personal debt. It is most evident with those who have been employed for a while and suddenly see themselves being laid off.

This is especially problematic when the total amount of money being spent on debts is considered. People are spending approximately £1.25 billion on items with plastic card transactions. This is a sign that the personal debt problem in the UK may end up sticking around for a while.

There is one positive sign to see with this factor. The number of job vacancies around the UK is very close to the half million mark. Therefore, there is a potential that the unemployment rate could decline if enough positions are actually filled. This might cause the total amount of debt to go down if people can actually earn more money.

This point about UK personal debt is one that needs to be understood. Personal debt is being heavily influenced by unemployment in the country. The rise in unemployment is a serious problem because it involves the way how people around the country are not in a position to make their payments as they should be able to.

Debt Management in the UK

Debt Management in the UK

The worst possible thing you can do when you get into debt is ignore it. You know it is not going to go away but you just do not want to deal with it. This is the attitude that will cause you to sink into debt further, and nothing will get solved. Debt management is something that takes dedication and perseverance. You cannot get discouraged and quit if you want to become debt free.
There are some helpful debt relief companies that will help you in the UK and you can easily apply for them online. They will help you come up with a plan to rid yourself from the constant stress of being in debt. They will counsel you when you need help, and help you determine the severity of the debt you are in.

You will find that there are a few ways to go about debt relief and they are all doable. While some may require sacrifices, it will not be anything you cannot stand for long. If you seek a free method of consolidating your debt then there are lots of websites that offer you free advice and helpful tips for saving money.
Debt management can stop all the annoying creditors that ring your phone day and night. They can help keep them at bay, and come up with a plan to stop those calls for good.

Being in debt can be very stressful, and can mess up your credit score which will hinder you if you need to buy a car or a home. You should really try hard to pay off your debt before you take on anymore, this can be done with the help of a debt management company who will arrange for lower payments and in many cases have the interest frozen, depending on a persons circumstances and the level of debt an IVA may be the route to take and with and IVA it is possible to wipe out up to 80% of the total debts

Getting your credit back to a good score is top priority when you are dealing with debt. You do not have to struggle with debt on your own. There are people out there to help you.

Debt Management Plan (Debt Management Programme)

A debt management plan is an informal arrangement between a borrower and their creditors when general contractual payments cannot be met due to the borrower facing financial difficulties.

The Debt Management Plan was introduced in the UK by the Consumer Credit Counselling Service (CCCS) almost 20 years ago. At that time, it was a debt solution that dealt with the fallout of unsecured lending as the personal lending market was expanding at a rapid pace.

A Debt Management Plan offers a structured agreement to pay all unsecured debts, instead of writing off some of the loans that would would within formal debt solutions such as Individual Voluntary Arrangement (IVA).

This agreement runs over a longer time than formerly agreed, with one affordable payment per month that the debtor is able to meet after having taken in to account their personal circumstances. The payment is distributed to lenders on a pro-rata basis.

A statement of income and expenditure is produced in order to decide just how much a person could realistically afford to pay after paying for all of their everyday living expenses.

One of the most important things about a debt management programme is that it provides an affordable way to subsequently pay off all the person’s debts. It makes sure the debtor has enough funds to afford everyday living expenses, instead of being obligated to give creditors their funds before living expenses are taken care of.

Having said that, you will find pluses and minuses in a programme such as this. A Debt Management Plan is an informal solution, which means that creditors don’t have to accept the programme – nevertheless the most companies do, and a number of freeze interest or fees, which means the money is paid back a lot quicker than it would be if the interest was still accruing.

One creditor disagreeing with the implementation of a DMP can not bring down the programme, but will make it more challenging for the debtor to pay off all of their debts successfully. In these rare cases the debt is still paid at the reduced pro-rata rate and your debt adviser will keep pushing for them to recognise the offer by proving that you are sticking to your revised payment schedule.

Setting Up a DMP

For those thinking of entering a DMP, you can organise it yourself and you can find web sites or internet forums that advise on the easiest way to go about this. It calls for creating a budget sheet – showing incomings, outgoings and debts – to clearly show what money is left over after essentials, household bills and priority bills are paid.

You then need to speak with each creditor, in turn, and ask them to accept reduced monthly repayments from any excess amount.

It should be noted, however, that it is a complicated procedure to set up a DMP on an individual basis and it could be fraught with problems, including negotiating with the very same lenders that are chasing you for money. For those in an overwhelmed state of mind this is just too much to contemplate.

Instead, we suggest that a third party arranges a programme for you so there’s an middle man between you and your creditors.

Getting this buffer means that for the duration of this stressful stage, when creditors and debt collection agencies are calling you continuously with demands, you have someone else acting in your greatest interest.

The advantage of using a go-between also comes from their relationships with the creditors. As they arrange countless DMPs each year, they are often in a stronger position to negotiate with the lenders.

DMPs provide a clear framework for paying off your debts and, should your creditors agree to the DMP, they’re incredibly practicable.

If you fail to adhere to the DMP repayments then other options might need to be considered, such as formal options like individual Voluntary Arrangement (IVA) or bankruptcy.

UK Premier Furious Over Weak Promises Made To Prop Up Debt Riddled EU

Prime Minister David Cameron yesterday asked that European Union leaders fix their debt mess immediately in order to avoid what he foresees as an impending economic tragedy.

The UK Government leader called the German Prime Minister to press her on delivering promises her government made to prop up the EU’s needy countries.

Cameron’s irate reaction seems to have been triggered by the tumbling stock markets around the world this week.

The London FTSE lost almost three per cent this week and this equates to around 10% of the UK’s top companies value being wiped out. The damage looks to be £164 billion, according to analysts familiar with the market with these companies.

This is the largest dip since Lehman Brothers collapsed in 2008 causing the worst crash in the history of the UK.

The UK Prime Minister is angry because European leaders created a rescue package for the Euro currency, then decided that their summer holidays were more important than staying behind to ensure that it was properly implemented.

The European debt issue, and the fact that the United States has dented its impeccable credit rating, has caused the stock market chaos felt around the world today.

David Cameron is on holiday in Tuscany and made his angry demands from his holiday home there. He was also supported in what he said by his chancellor George Osborne who is also on holiday in the US state of California

Cameron was in contact with the French chancellor, urging him to put the recovery plan in to action as quickly as possible.

The UK government are extremely concerned because it is looking increasingly more likely that Spain and Italy are going to default on their debt repayments, as well.

Italian Premier Silvio Berlusconi has finally relented and made public that he is calling for an emergency meeting of the G7 and is determined to address Italy’s debt problems.

US President Barack Obama tried to sound confident when he said “we will beat this” and made his promise to the American people that things will get better in the global economy.

World traders are not convinced by any of this latest news that there will soon be an upturn and this is causing very unstable market trends which could be devastating to world economies.

Home Owners in UK Paid Down £7 Billion in Mortgage Debts

In the final quarter of 2010, buyers of homes in the United Kingdom paid off more than £7 billion of their mortgage debts. This marks 11 consecutive quarters of borrowers paying down their mortgage debts, a feat that amazes many as it is the largest reduction in this type of debts since records began being kept more than four decades ago. Many believe this is able to be done thanks to the fact that interest rates are now extremely low and this is helping to lower the debt burden for British families. In addition, the figures are most likely helped by the fact that today’s UK banks require far higher deposits that buyers are not often in the financial position to make due to today’s economic realities. This therefore constricts the figures to measuring a smaller number of more successful borrowers. With housing prices falling lately, many buyers do not want to purchase a home now in case the price dips further or they may face the fear that interest rates may rise so now is the time to pay down their mortgage debts.

Spending cuts and job losses have seen many entering into debt management in an attempt to handle their debts and get themselves to a point where they will be able to consider a home before prices rise again. Those buying a home with cash are also increasing in number, experts say, with these types of buyers having far lower mortgages as a result of a cash purchase that creates much smaller levels of debt for themselves.

In years past, many people had leveraged their homes’ equities to take out cash that they could spend. Items purchased included vehicles, improvements for their houses and even holiday trips. The Bank of England’s statistics show that 2008 was a particularly heavy year for this type of approach, as many used this method to get more cash on hand.

As costs of living rise and wages do not rise to corresponding levels, families are finding that they have quite a bit less to spend. UK consumers are continuing a trend of spending less and this has had a heavy impact on the economy. Many economists say it could be quite some time before the UK’s economy rebounds in any significant way.

British Debtors Facing £10 Per Month for 3 Years

Many in the United Kingdom have sharply conflicting ideas on just what is appropriate for those with debts today. For some, experiences such as working out at the gym or enjoying a meal out are absolutely not okay for those with debts. To these of more extreme perspectives, debtors should be allowed only enough money, after seeking a bankruptcy, to cover their bills for their household or expenditures which are an absolute necessity.

The situation in Britain is sharply divided into polar opposites of social values. There are those who believe that debtors’ prisons ought to be revived as an appropriate result for those who find themselves owing money. Others believe that those who have suffered debt deserve compassion in most cases. Obviously, opinions in the UK run the gamut. As this debate continues, as it most likely always will, there are new rules headed to the UK which say those who are considering bankruptcy will also need to take into account that their disposable income will be handed over to their creditors for 3 consecutive years – allowing them to keep back none of it. This differs sharply from the past when perhaps half of disposable income those with a bankruptcy earned would end up in the hands of creditors.

These new rules, some critics say, were rather craftily put into effect and offer what may call ‘three miserable years’ to those who suffer debts. Serious stress and real psychological turmoil are what critics say those who undergo this 3 year experience are at risk for. Pints at the pub, cigarettes, movies at the theater and other activities will be out the window for those allowed £10 per month in disposable income. While sources in the UK media have reported that Insolvency Service officials have told them that they do not find the approach to be ‘unreasonable’. Rather, those officials believe they are establishing a balance of penalty without being overly harsh.

The new rules for those in bankruptcy will mean that they make regular payments to their creditors under agreements know as IPA’s which stands for Income Payments Agreements. Yes, a bankruptcy will only last for a year, but the new IPA’s will last for 36 months. Those who try to dodge will be faces with IPO’s: court issued Income Payments Orders that force the money to be given over. Mortgages, utility bills and rent are considered to be the types of expenses deemed necessities, but the rest? That will go to creditors – not just half of that disposal income like before.

The result is, critics say, unfair to most involved. Those in vulnerable situations will be up against sizable portions of their spare cash being removed with nothing to fall back on. Yet those who earn more, pay higher amounts. Both ends of the spectrum get their own special form of suffering, say those opposed to the new guidelines.

Many feel it may be wiser to consider debt management if you struggle with debt now. Alternatively, an IVA could offer a workable solution. Either way you slice it, bankruptcy is looking to be an ever tougher path in the UK today.

Insolvencies Hit An All-Time High

Insolvencies hit an all-time high

Insolvency figures have been released for 2010 and have hit an all-time high

According to the Insolvency Service 135,089 people were declared insolvent, a 0.7% increase on 2009, official records for insolvency began in 1960, since then there have never been figures even close to this number.

There is some good news in last year’s figures, 23% less companies went bust in 2010 than did in 2009.

Personal Insolvencies have doubled in the last five years.

Bankruptcy has always been the leader in insolvency cases with 59,194 people going bankrupt in 2010, this figure is down 20.7% on the 2009 figures, one of the main reasons for this is the increase in IVA’s  (Individual Voluntary Arrangement) with 50,716 taking this route, an increase of 6.5%.

IVA may soon overtake Bankruptcy as the benefits of an IVA can be a substantially better for people unable to pay their debts especially if they are home owners, IVA allows for a portion of the debts to be paid to creditors with anything up to 75% of the debts being totally wiped out in the process.

Debt Relief Orders were introduced in 2009 for people with debts less than £15,000 and who cannot afford the repayments required for IVA or Debt Management Programme, 25,179 people took up Debt Relief Orders in 2010.

The main reasons according to many experts are the result of irresponsible lending by the banks, credit card companies and loan companies.

In the years leading up to the credit crunch many lenders have been accused of making very attractive offers to potential borrowers with minimal or no credit checks, not checking to ensure that a borrower is in a position to make the repayments, not explaining the important parts of the credit agreements and misleading advertising.

This has resulted in loans and credit cards being given to people who have very little chance of ever keeping up the repayments.

There are of course many other reasons that people become insolvent like unexpected bills, loss of jobs or just a change in personal circumstances.

Whatever the reasons for becoming insolvent one thing has become very clear there are now more options to help than ever before, including government backed schemes.

It’s no longer as cut and dry as having to find the money for repayments or go bankrupt, there are various options for dealing with debt problems depending on the amount of debt and the amount a person can realistically afford to pay each month.

The companies offering debt advice will make no charge for any of the advice offered so people can speak freely with them to find the best solution that suits their situation.

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UK Banks Given Secret Loan of Over £62 Billion

In a revelation that has shocked the nation, the UK government has announced that the banking system teetered on the brink of utter collapse in late 2008, causing government decision makers to approve over £62 billion in clandestine loans to two of Britain’s most powerful banks. According to official documents disclosed only a short while ago and evidence turned in to the Treasury Committee in London, the move was made without informing taxpayers because it was feared that the already wobbling markets might grow even more unstable and that there could have been widespread public panic as a result.

The emergency financing was taxpayer-funded, and given to the Royal Bank of Scotland (RBS) as well as HBOS, each borrowing £36.6 billion and £25.4 billion, respectively. HBOS, which is now owned by Lloyds Banking Group, got its cash injection on October 1st of 2008 and then, less than a week later, the RBS received its boost. This came only weeks after Lehman Brothers Holding declared bankruptcy and the UK markets looked ready to nosedive. After even more loans further injections of capital this month, in excess of £30 billion for each bank, both Lloyds and RBS are now largely owned by the government. The government stake in the banks now stands at 43% of Lloyds and a shocking 84% of RBS.

The Bank of England, which made the loans, was granted indemnity by the Treasury in order to cover any potential losses caused by the emergency loans. The total amount of loans granted to these two banks alone is higher than the £49 billion spent on UK schools and larger than the national defence budget, as well. Although the banks have paid back the loans, the government continues to hold stake in both of them, causing questions to arise in light of the fact that both the HBOS and RBS were defendants in a recent court case, regarding unfair overdraft charges, which made its way to the Supreme Court.

For the past two years, the Office of Fair Trading (OFT) had been pursing HBOS, RBS and several other lending institutions because those banks were charging upwards of £20 to £50 to customers who accidentally exceeded their overdrafts. The OFT had won its case in both High Court and the Court of Appeal, with experts predicting a nearly guaranteed victory if the banks appealed to the Supreme Court. The hearing in the UK’s highest court took place in June of 2009, a mere 9 months after the government gained control of stock in both HBOS and RBS. When the shocking result, that the government’s own consumer protection agency OFT had been refused the power to investigate the overdraft charges that many customers been expecting to have refunded, many expressed speculation that the move might have been made to save the government from shelling out the £20 billion that would have been paid back to those charged unfairly.

Had that enormous sum been required, the government’s shares in the banks would have dropped and this leads many to question not only the billions in secret loans, but the swift change in court rulings, as well. An unprecedented number of UK citizens are already struggling under enormous debt loads and many had hoped to have the overdraft charges returned to them through the OFT, possibly in time for Christmas. While some had wanted to balance their budgets and take a holiday, many others needed the money to repay debts and get family finances back on track. Now these individuals will be turning to Debt Management Programmes or Individual Voluntary Arrangements since it appears that there is no chance they will be compensated for the unfair charges to their accounts.

Consumer advocate groups are expressing outrage and political speculators believe the situation could be a conspiracy simply based on the fact of who stands to benefit from not only the loans being kept secret, but the Supreme Court decision regarding the OFT’s powers. Could this be a conspiracy? Could this essentially boil down to government sanctioned predatory lending that comes at the expense of tax payers?

Debt Management Plans

The debt management plan can do for you as an individual or as a business, it will be good to decide its scope. It is a misconception among many people that debt management plans can only be used for eliminating the existing mound of debts. Nevertheless, debt management plans have an extended scope. As the name suggests, debt management plans may be used with advantage to manage the debts to a particular level. It must be acknowledged that a proper management of debts makes debt consolidation and other methods employed to fight the menace of debts superfluous. Prevention is better than cure. Most of us repeat the adage incessantly. It will be through debt management plans that one can really develop the habits in ones life.

Most budgets are done on a monthly basis. You should record your monthly income and expenses on a sheet that will allow you to subtract your expenses from your income.

The debt can be either fixed or variable, but is different because you do not pay the full amount each month. You can chose how much you want to pay or have a minimal amount you have to pay.