It makes more sense to instigate a debt consolidation strategy than try to build up savings in the current economic climate, an expert has said.
Justin Modray of candidmoney.com said that with many people in debt, some of those who do have savings will actually be using them to pay off some of what they owe.
He stated: "I think for many it's more a case of just trying not to drown in debt and saving for the future remains a pipedream."
And Mr Modray noted there may be more challenges to come for those struggling to avoid their debt becoming unmanageable, due to potential further rises in the prices of food and domestic energy, as well as the impact of government austerity measures such as cuts and higher taxes.
The one crumb of comfort he was able to offer to hard-pressed consumers is that there should be "some respite through low mortgage payments," which continued low interest rates can provide.
Those who are keen to get debt free eventually may find that if they can pay off extra now on any debts linked to the base rate – such as overpaying on a mortgage – this may be a wise move, as it can save on interest charges later on when the rate goes up and monthly charges increase.
Mr Modray's comments follow the publication of Credit Action's latest statistics on debt, which showed that including mortgages, the typical UK household owes £55,803.
Another finding was that the amount of interest paid on debt in the UK is £177 million per day.
Posted by Paul Thacker