Bad Debts on the Rise

The Bank of England is pointing out that the number of bad debts that were defaulted on by consumers has increased by an alarming rate through 2009. Financial institutions were forced to write off over 4 billion pounds in bad debt as many consumers declared bankruptcy or find an individual voluntary agreement that ensured they would not be paying back all of their debt. The previous highest number in that category was 3.2 billion pounds that was written off in 2008, so the increase of close to 1 billion pounds has many in the credit industry worried.

More than twice as many mortgages were written off than usual and that combined with personal loans and credit means that the total amount of write-offs for the year reached as much as 9.3 billion pounds.

The effect of this increase in bad debt is being felt most by borrowers that are known for making all of their payments on time. Credit card interest rates are on the rise meaning people are being faced to pay larger monthly payments and new homeowners are having to jump through all kinds of hoops to ensure they meet the criteria and standards of lenders.

It is a sad truth that the most on time of borrowers have to feel the effects for the people that had to declare bankruptcy, but that is the sad truth about the economy at this moment. If interest rates continue to rise then consumers are going to have to learn to live without borrowing, and simply spend what they have at the moment in order to avoid substantial monthly payments on their credit card debt.

That is, unless the government or credit industry can step in and proposes policies or solutions to protect themselves and consumers as we all try to work our way out of this dire economic situation.