Today’s post is a guest post about debt management. Certainly getting rid of debt is the first step in building wealth. SI
Responding to comments from the International Monetary Fund (IMF) that an economic recovery could be slowed down by high levels of household debt in the UK, financial solutions company Think Money has said that the difficulties facing the economy still pose a threat to many people, and anyone experiencing problems with repaying their debt should seek debt advice as soon as possible.
After Chancellor Alistair Darling told The Times that the recession would be over by Christmas, the IMF said that Britain had “set the stage for sustainable recovery”. However, it added that high household debt – as well as the Government’s own debt – could be holding back a recovery.
In its annual health check of the UK’s economy, the IMF said: “The recovery is expected to be subdued and gradual as banks and households go through a difficult balance sheet restructuring process.”
Levels of personal debt have been on a rising trend throughout the recession, most likely due to a combination of rising unemployment, falling incomes and higher costs of living.
Indeed, Ministry of Justice insolvency figures showed a significant year-on-year rise in debtor’s petitions for bankruptcy (i.e. applications by the borrowers themselves) in the first quarter of 2009, with 29% more petitions put forward than in the same period in 2008, and 9% more than in the previous quarter.
A spokesperson for Think Money said that the levels of debt amongst British households highlighted the need for careful financial planning and effective debt management.
“The sharp increase in debtors’ bankruptcy petitions in the first quarter of this year gives a stark picture of the problems facing some people at the moment, but it is also only the tip of the iceberg,” she said.
“There are also likely to be large numbers of people who are not necessarily facing bankruptcy, but are nonetheless having real problems with meeting their debt repayments and other financial commitments – and anyone in that situation should address the problem as a matter of urgency.
“Because interest causes debt to grow, it’s very important that borrowers do their best to ensure they are making each of their debt repayments on time. If they repeatedly miss payments, the interest can cause the debts to ‘snowball’, and that can put the borrower in an even more difficult position.”
The spokesperson added that if borrowers are experiencing problems with their repayments, they should not hesitate to seek professional debt advice.
“There are a range of debt solutions available that can help borrowers to clear their debts. For example, if the borrower cannot keep up with their current debt repayments but feels they may be more able to repay their debts at a slower pace, a debt management plan could help.
“Even if the borrower feels they will never be able to repay their debts in full, a debt adviser could help them to find a debt solution that will help them to clear as much of the debt as possible.
“It may even be that the borrower simply needs help with organising their finances in order to help them repay their debts. Whatever the case, a debt adviser can recommend the best course of action based on the borrower’s circumstances and needs.”
Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI
Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.