Debt levels could hinder recovery
21/09/2009
The level of debt that people in the UK are carrying could actually slow down the rate at which the country emerges from recession, an insolvency expert has said.
According to Peter Sargent, president of R3 - the Association of Business Recovery Professionals - the sheer amount of debt that UK consumers are carrying is like a `ball and chain`, hampering the nation`s progress and potentially keeping it from emerging from the recession as fast as other countries.
As moneynews.co.uk reports, Mr. Sargent advised people to clear their debts, starting by paying off the most expensive - i.e. the one with the highest interest rate. He particularly stressed the need to stop getting deeper into debt by borrowing on high-interest lines of credit such as credit cards.
He said: "People are borrowing on their credit cards and paying off mortgages, which is wrong because credit card debt costs more to service."
According to the latest figures from the Bank of England, people in the UK were carrying almost £1.5 trillion of debt at the end of July.
To be precise, they were carrying £1.4569 trillion of debt: £1.2263 trillion of it secured debt and £230 billion unsecured debt.
However, this was actually £600 million lower than it had been at the end of June - July was highly unusual, as it was the first month since records began in 1993 in which total debt actually dropped.
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