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£1800 Will Be Needed For Unsecured Borrowing Debt Costs

by Jim ONeil on January 31, 2011

in uk loans news

By 2015, households in the UK will need to pull together £1,800 to pay interest on their unsecured debts. In the next three years, loan and credit card interest rates are anticipated to rise by two to three percent. Coming up with the extra money needed to continue servicing loan and credit card debt will be a challenging task for many people, as this represents a significant portion of their disposable income.

In its report, PwC accounting firm explained that unsecured debt interest rates are not tied directly to the base rate of the Bank of England. However, factors like a new regulation that requires a bank to hold additional capital, as well as the continued liquidity shortage, will play roles in increasing rates. PwC predicted that consumers will continue to pay down their debts in 2011, but at a slower rate.

During 2010, there was a £500 decrease in unsecured borrowing by the typical UK household. Weak consumer confidence has driven people to forsake open-ended credit cards and large loans. Instead,

they are using small, short-term credit to fund specific purchases. The number of circulating credit cards fell by 1.5 million last year to its lowest figure since 2003.

Credit card decline was due to restrictive lending practices by card providers and falling consumer demand. In spite of this drive to reduce borrowing, the average home has approximately £8,000 in outstanding loan and credit card debt. According to PwC, a consumer who wishes to borrow more money this year may face some problems.

For 2011, credit supply will remain constrained, with lenders attempting to reduce losses due to bad debt by focusing on individuals with strong credit scores. The credit scores of many have deteriorated, making them ineligible to borrow from high street lenders. PwC partner Richard Thompson said that these individuals are instead using credit offered by payday loans and point of sale finance projects.

Studly

Nope its justifed

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