It has been reported that here in the UK we are facing a debt time bomb!
Just the wording and choice of how to present this sounds ominous.
Using the words debt and time bomb in the same sentence, in these times, is a bit scary.
However, the facts speak for themselves. As consumers, which we are very much so, we buy, consume, spend money, and live life, some to the fullest. And also in doing this, we use credit; which creates debt.
Credit in itself does not create debt, credit is just giving someone access to a sum of money, or a credit line/limit. You need the human factor, the “us” factor to create debt.
Debt is a formula, a formula made up of credit, spending, us as consumers…consuming, that when all added together, creates debt.
And being in debt is not cheap, it costs you more to be in debt than to not be in debt, due in part to the interest you pay. Then there also can be fees, charges, the emotions and stress, if you default on an account, the collection process.
It all adds up.
If we are to believe what we read and are told, it adds up to £200 billion!
How did these levels of debt get to be so high???
It’s not difficult when you break it down.
How Did We Get Into Debt?
How did we get into debt?
How did we find ourselves in this much debt?
These are questions people, families, and households ask themselves daily.
The answers may come from different areas, but the universal answer is debt came from living beyond our means, spending too much money; borrowing our way through life. And not being able to pay off what we borrow within the short time frames of, the next billing cycle.
This is not said or written in a negative manner or way, or to sound like those in debt are bad people or have done something wrong, because the majority of them have not done anything wrong.
They have lived their lives, accepted the economical and social ways things are, and by doing so, debt appeared, appeared and grew.
This could be through the use of credit to maintain a lifestyle, either though over spending and over extending oneself, either through a necessity or through wanting more.
If someone’s income is reduced, they may use credit to buy food, and pay the bills.
Someone may use credit to buy the newest, latest, and greatest gadgets and toys.
Banks and lenders need to lend money as that is their business. It is a foundation of their business model. In doing so, they aid the credit machine, which creates the debt monster.
Increasing account holders credit lines on credit card and overdrafts as a matter of routine, without asking, or reviewing the account holder’s finances, feeds this machine as well.
Then when you are in debt, overextended, maybe struggling to repay the debt(s), you are told your credit score and credit history will reflect this; you may get bad credit.
One of the children of being in debt is “bad credit”. We are threatened with this “debt child” constantly.
Pay your bills or you’ll have bad credit.
You don’t want bad credit do you?
“They” make bad credit sound like a terminal disease.
And it is true that having bad credit can cost us…there’s that cost factor again from being in debt.
Bad credit can affect other areas outside of getting credit, such as employment, and insurance and other things in life.
However, it is not a disease, or at least one that has no cure. Bad credit has a cure, time, and bad credit loans.
Remember, banks and lenders need to lend money, they NEED TO!
Even to people with bad credit.
So a second child was born from debt, Bad Credit Loans!
Bad Credit Loans
Bad credit loans are exactly what they sound like and are interpreted as being; loans for someone with bad credit or a low credit score.
If you don’t qualify for a “regular” loan, due to poor credit, or even no credit, you can get a bad credit loan.
Bad credit loans can be:
* Payday Loans
* Guarantor Loans
* Logbook Loans
* Doorstep Loans
Loans that basically carry a higher interest rate, and different terms than a standard bank loan.
So even with bad credit you can get a loan. Which adds to the debt monster.
Getting Out of Debt
So once you “find” yourself in debt, how can you get out of debt?
There are many ways to do this, to get out of debt. Some are quick, and some take time. Some ways you can do yourself, others involve assistance from third parties. And some involve the courts, and insolvency laws.
But the bottom line (pun intended) is…you can get out of debt.
The Current State of Affairs
Recently it has been estimated that there is £200 billion of debt here in the UK, which is spread out amongst 8.3 million people.
The debt advice charity StepChange has also released some figures which shows 40% of its clients have “fallen behind” in payments on their accounts in the first half of 2017, and that the average amount of debt people have has not grown from £14,251 in 2016, to £14,367, in 2017.
Even the Chief Executive of the FCA/Financial Conduct Authority, which is the regulator and watchdog for credit and lending institutions, Andrew Bailey has expressed his concerns.
Mr. Bailey has stated he has visited various debt charities across the country and seen first hand that people are facing “frontline debt”, such as council tax arrears, and utility arrears.
He has stated, “I don’t think we have a sustainable solution, in terms of the provision of credit where needed.”
“No one body might solve it on their own.”
This would seem to allude to the problem being larger than what one institution or regulator may be able to handle.
There has been this huge surge over the years of cars being bought on car finance such as PCP/personal contract purchase, and half of all of those credit credit card users are on zero or low interest rate cards, which will not last forever.
Mr. Bailey added, “There is a really big question around how do you provide credit. There is a case for people [needing loans] having access to credit, particularly in a world where earnings are more erratic.”
In referencing the “so-called gig economy”, he added: “Credit is a means of smoothing [erratic incomes] but the question is how do you structure it in a sustainable fashion.”
“It needs government involvement.”
The FCA has itself stepped up their game with Payday Loans and capped the fees they can charge, and also the number of times a loan can be rolled over.
But more still needs to be done.
Addressing the issues of zero % credit cards, interest only mortgages, and of course the easy access consumers can have to credit, all make-up this huge boiling pot of debt.
Which soon could boil over, £200 billion pounds worth of boiling over.