Think carefully about dealing with debt

Mar 4 2008 by Sue Scott, Evening Gazette

AS more consumers struggling to overcome the UK’s £1,500bn mountain of personal debt look to bungee jump out of trouble, one Guisborough firm is urging them not to enter Individual Voluntary Arrangements (IVAs) or bankruptcy, without properly considering all their options.

About 18% of adults in the North-east are estimated to have £10,000 or more of unsecured debt, much of it piled on to one or multiple credit cards.

Nationally, the noose is tightening as the days of cheap credit come to an end and the burden of borrowing falls on ever younger shoulders. According to Consumer Credit Counselling Service research, the average 24-year-old is now saddled with £16,351, mostly made up of personal loans, with parents increasingly relied on to pay their offsprings’ debts.

But Karl Pemberton, director of Active Financial Services, believes many people are contributing to their problems by opting for an IVA without looking at less drastic solutions, such as a debt management plan.

“It is easy to panic when you have over-reached yourself financially,” he says.

“A lot of people seem to be being advised to take the route of an IVA when they can no longer afford the debt they have built up, but there are cheaper and more reputable ways of escaping debt problems with your credit rating left intact.

“Most lenders are shying away from personal loans in the wake of the credit crunch but, in many cases, debt can be managed by restructuring your existing finances and, where appropriate and where there is sufficient equity, consolidating the debt with a homeowner-secured loan.”

He said it was important for people to seek advice as soon as they started feeling the pinch.