Past Articles for the Personal Debt Category

University fees and the rise in the number of people going on to higher education are causing parents to worry about debt, an investment company has said.

Anna Sofat, director of Addidi Wealth, said around the top 30 per cent of the population is now going to university compared to five per cent previously – and parents are shouldering the cost.

“If they don’t fund it then they see their children starting life with debt so it’s a worry all round,” she said.

Potentially this could mean parents struggling to remain debt free, however, particularly with the added burden of retirement.

Ms Sofat said parents can now put money away for their children’s pensions, suggesting they may be neglecting their own.

“This is not something which is commonly being done by parents on more modest incomes,” she added, however.

According to research by Skandia, 40 per cent of parents expect to help their children clear debt well into their 30s.

By Morwenna Kearns

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People who are considering taking out a loan may be risking debt management issues due to interest rate rises over the past two years.

Comparison service uSwitch found best buy unsecured personal loans for £8,000 over four years are currently 7.4 per cent annual percentage rate (APR), compared to 5.5 per cent APR in January 2006.

Those taking out smaller loans are feeling the hit the most, the study indicated, with a 3.44 per cent rise on rates for £1,000 over one year in the last 13 months to 19.99 per cent APR.

Consumers considering a consolidation loan to become debt free may be concerned about the rises.

Simeon Linstead, head of personal finance at uSwitch, said credit cards may offer a cheaper alternative to small loans and the internet often offers better deals.

He added that fixed-rate loans can offer “the peace of mind that both their interest rate and monthly payments are fixed for the term of the loan”.

In other news, Nationwide announced fixed rates for its mortgage are to be cut by up to 0.2 per cent.

By Morwenna Kearns

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Parents are concerned about their children’s debts should also take care of their own financial wellbeing, Addidi Wealth has said.

Following the release of a report by investment provider Skandia revealing 40 per cent of parents are worried about having to help their adult children become debt free, Addidi Wealth’s director has spoken about the issue.

Anna Sofat advised parents to help children with money “as much as they are able to” but not to risk debt management problems themselves.

“If children are brought up to expect that they can always fall back on their parents, then where is the incentive for them to make something of themselves?” she said.

Ms Sofat added that anything in addition to “a decent education” should be considered a “bonus” rather than an essential part of life.

Skandia’s report also found 34 per cent of parents expect to offer a home to their children throughout adulthood due to the fall in first-time buyers.

By Morwenna Kearns

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People may look to price comparison sites for a consolidation loan because they seem an easy way to search through options, but Which? has said they may not be as simple as they look.

According to the consumer magazine, the three major price comparison websites do not always give the same results for insurance, loans and credit cards.

One site, for example, found the cheapest standard-rate credit card on the market to be one with a 12.9 per cent annual percentage rate (APR), while another comparison site found a card with an APR as low as 6.8 per cent.

The research suggests that people hoping to clear debt or get loans for other reasons may not be getting the cheapest rates available.

Martyn Hocking, editor of Which? Money, said consumers should compare comparison sites to make sure they get the best deal.

“You might be very confused to find that different sites can give you vastly different quotes and often don’t give enough information for you to make an informed choice,” he warned.

People in debt may also benefit from money-saving advice, also released by Which? this week.

By Morwenna Kearns

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British adults know less about personal finance than a year ago, according to a study released by Abbey.

The bank found one in seven people were unable to achieve a mark of over 40 per cent in a GCSE-level exam on personal finance, to gain the equivalent of a grade C.

Last year’s study, using the same test, found one in ten were unable to achieve a grade C – indicating 1.3 million more adults are ‘financially illiterate’ than in 2007.

The findings were described as “quite worrying” by banking director Steve Shore – and they may suggest debt management problems are around the corner for people who are not familiar with financial issues.

Among other conclusions, the test results indicate 88 per cent of the population do not know they have six weeks to repay credit card debt before interest kicks in, a two per cent rise from last year.

Thousands of students will receive their GCSE results today (Thursday).

By Morwenna Kearns

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The UK’s first Debt Worry Index shows a third of struggling debtors will never afford to repay all they owe and families are much worse off than childless debtors. (more…)

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The Centre for Economics and Business Research (CEBR) has said rising inflation levels will have real effects on families’ cost of living.

For the poorest families, financial struggles may result in debt management issues or credit card debt.

CEBR economist Charles Davis said “clearly, in real terms, the average family is probably getting poorer,” when the average earnings growth of around 3.8 per cent is compared with inflation at 4.4 per cent.

“Their budgets have been squeezed by the high cost of food, transport, housing and housing goods and services such as utility bills,” he explained.

According figures published by the Office for National Statistics this week, food inflation rose to 13.7 per cent in the annual rate in July from 10.6 per cent in June. Gas, electricity and other fuels increased in the annual rate to 16.1 per cent.

People concerned about debt problems ensuing from such rises may want to seek professional advice.

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Shoppers may be adding unnecessary costs to their purchases by using high-interest store cards, Alliance & Leicester has warned.

A quarter of British consumers have store cards, which have an average interest rate of 26 per cent, the report said.

For many people, bargains from summer sales or new clothes for a holiday may end up as debt management problems.

To clear debt, Alliance & Leicester’s personal loans manager Mark Boyle has suggested looking into a debt consolidation loan.

“For those who wish to make their debt easier to manage, taking out a personal loan and consolidating it into one easy-to-manage chunk may be a wise option,” he said.

People worried about credit card debt or other debt management problems should “take stock” of them, according to Mr Boyle’s comments.

This week the Financial Times, citing research from Standard & Poor’s, reported an increase in the number of households “walking away” from credit card debt.

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A new debt advice community website has been launched – ReallyWorried About Debt – and new research on the issue has been released.

Over 9,500 people were questioned on ClearDebt’s website, making it one of the largest surveys undertaken in the UK.

A major finding of the study was a £3,150 increase in the average amount of unsecured debt since 2005. It now stands at £26,644.

In terms of age and gender, men over the age of 45 are need the greatest increase in their income to clear debt, owing an average of 117 per cent of their annual take-home pay.

Regionally, residents of east-central London and the City owe the most money – an average of £41,002.

ClearDebt is offering free advice to users of the website and supporting the “Funts – Financial Untouchables” campaign launched by ReallyWorried About Debt’s founder Richard Rubin.

David Mond, ClearDebt’s chief executive officer, said: “There are many thousands of people in Britain who are doing their absolute best to repay as much of their debt as they can afford, yet who are treated as funts by financial institutions.”

He went on to say people should seek debt advice and use services such as the new site.

Another supporter is Coronation Street’s Bev Callard, who has been in the soap as Liz McDonald since 1989.

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Figures released by Key Management Solutions has indicated British people are heading into retirement with debt management issues.

The study of people aged over 55 who have released equity from their homes found one-third are in the red, with collective debts totalling £66 billion.

One person in four has outstanding personal loan payments, owing an average of £8,766, while a fifth have credit card debt, averaging £8,358. Three per cent are into their overdraft, with debts of £3,667.

Dean Mirfin, business development director at Key Retirement Solutions, said: “As the cost of living is on the up, these figures, even if they are only part reflective of pensioners as a whole, are of real concern.”

He added people should be aware of approaching retirement with debt as the cost of living for the older people has exceeded the rate of inflation in the past ten years.

Earlier this month, Halifax has said people should seek advice for retirement planning, while Prudential warned a state pension is not enough.

By Morwenna Kearns

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