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UK Families Increase Personal Loan And Credit Card Debts

by Jim ONeil on January 28, 2012

in Debt

UK families have increased their average amount of debt by nearly 50 percent in just one year, according to recent research from the insurance company Aviva. As of early January 2012, the average family in the UK had £7,944 in financing, including credit card and personal loans debt.

In January 2011, this figure stood at £5,360, a substantial amount but much less than the most recent figure, which equates to just shy of one-third of typical annual income.

Experts worry that this trend may indicate future problems as pressure on finances increases. Families with unsecured debt are relying most on credit cards, owing £2,314 on average.

The typical UK family has a personal loan balance of £1,739. Aviva protection sales and marketing head Louise Colley pointed out that although average income has increased during the past 12 months, so have prices for needed goods and services, leaving families struggling.

Both childless couples and those with children were subjects of the Aviva survey. Couples who were planning to start their family had the highest debt levels, over £15,000 on average. Being in this financial predicament has made it difficult for families to save money.

Despite a seven percent increase in average net income during the period studied, average savings declined from £22 to £21 per month. Forty percent of families surveyed last year reported they were not saving any money each month. This figure increased to 42 percent by early January 2012.

This may be bad news for UK families but it is good news for providers of payday loans. This financing is playing a critical role with UK consumers trying to make it through difficult financial times. R3, the Association of Business Recovery Professionals, released the results of its latest survey regarding financial habits of Brits.

Some of the questions focused on payday lending, offering the first comprehensive look at this industry in Britain.

Of the 2,000 British adults surveyed in October 2011, seven percent- 3.5 million people- planned to use a payday loan within the next six months. According to 60 percent, a payday loan made balancing the monthly budget an easier task. Interestingly enough, 39 percent noted credit card debt as the largest reason they could not repay their bills.

Sixty-eight percent of Brits who used payday lending reported repaying the balance on time.

Seventy percent of previous payday loan customers said that they did not have access to credit elsewhere. Though they applied for different loans, bank and credit union rejections left them with no other option.

Payday financing was used by 52 percent of respondents because it was easier to obtain than other types of credit. These no credit check loans feature quick approval and funding.

Some experts believe that this survey actually understates payday loan customer satisfaction levels. UK Consumer Finance Association (CFA) head John Lamidey reported that CFA and independent research revealed a 94 percent satisfaction rate.

Though a payday loans APR is higher than rates for conventional loans, the availability and convenience of getting this short-term financing are proving very attractive.

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