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UK Debt Situation Worsens Due To Interest Payments

by Jim ONeil on February 29, 2012

in Debt

For many UK consumers with loans, debt has become an unpleasant fact. Households report using one-quarter of their income to repay interest on their debts, according to the Consumer Credit Counseling Service (CCCS). The average household pays nearly £200 per month for interest alone.

When this is combined with high inflation, soaring fuel costs, and pay freezes, the financial situation becomes even more difficult.

To ease the discomfort, many people are taking steps to consolidate their debts. According to the CCCS, there has been a sharp increase in requests for debt advice from working professionals ages 45 to 59. In 2005, this age group represented 22.8 percent of CCCS customers.

By the conclusion of 2011, the number had increased to 31.7 percent, according to a CCCS report. Also included in this document was a prediction that debt advice demands would peak in 2014.

Many consumers are struggling to stretch their disposable income to cover their expenses. On Sunday, diesel fuel prices reached a record £1.50 per liter. Housing and utilities costs are also on the rise. Many people turn to cheap loans, while those with credit issues take no credit check loans, each featuring an interest component.

Making these interest payments is proving difficult for some UK borrowers. Reasons include the main breadwinner losing a job and sources of other income being depleted. As the unemployment rate increases, loans APR are expected to remain low.

In the early stages of the financial crisis, many UK households amassed loans debt, leading to an increase in pounds per disposable income spent to service debts.

CCCS reported that the proportion of discretionary income used for interest payments should remain stable during upcoming months. At the same time, debt levels are expected to continue their decline, according to CCCS chairman Lord Stevenson.

The majority of individuals seeking debt counseling are from North Wales and London.

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