Worrying about debt is not the answer, whereas taking practical steps is, an expert has said.

Commenting on the issue, hypnotherapist and life coach at Mypartnerisdepressed.com Caroline Carr said: "Do what you can to take steps to sort your finances. It's ok to ask for help. Once you have done what you can, let it go. Worrying about it does not actually help or alleviate the situation."

Those who are in particularly deep debt may find one way out of a very stressful situation is to seek an individual voluntary arrangement, or IVA.

An IVA works by negotiated reduced (and more manageable) repayments with creditors, leading to debt being frozen and the new amounts being paid over a period not exceeding five years.

While these new payments do have to be maintained with discipline, those taking on an IVA can find it frees them from the stress of being chased by debt collectors or bailiffs and can help take away the prospect of repossession.

And having some kind of control over a situation is important, Ms Carr said, because "money issues can often seem to be way out of our control".

IVAs are binding on all creditors as long as three quarters of those owed money agree to the proposed revised payments.

The level of consumer debt was revealed to be £55,822 per household including mortgages, with this still amounting to £8,042 when secured lending is discounted, according to Credit Action's October statistics digest.

And there are also 154 mortgage possession orders issued every day as many fail to stay in their homes.

Posted by Paul Thacker
 

Credit card and other borrowing levels remain low, according to a new study on lending.

The Finance and Leasing Association (FLA) has drawn this conclusion after figures on its members' lending revealed the year to August 2011 saw a two per cent drop in overall consumer borrowing, which totalled £51.3 billion over the course of the year.

Car finance was the only form of credit to see an increase – up one per cent – as other areas saw a decline.

Among credit cards and personal loans, the dip was two per cent, which may suggest consumers using these means to borrow in the past have been looking to consolidate borrowing by trimming balances and opting for early settlements where possible.

Storecards saw the greatest fall in usage, with lending down 20 per cent, while second mortgages dipped ten per cent and store instalment credit by eight per cent.

FLA head of consumer finance Fiona Hoyle described the figures as showing "continued weakness in the credit markets" and argued against any legislative changes that might make it harder for consumers to borrow.

However, paying off debt and bringing down the amount owed is something many people have advised will be a good thing for consumers.

Prime minister David Cameron came close to stating this in his Conservative Party conference speech recently, but altered the wording to say that people already are reducing balances, rather than saying everybody should.

The original transcript of the speech read: "The only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills."

By James Francis
 

All nine members of the Bank of England's Monetary Policy Committee (MPC) voted in favour of the £75 billion expansion of the quantitative easing (QE) scheme this month, it has been revealed.

Minutes of the October MPC meeting showed all members voted unanimously for the increase in asset purchases, as well as the retention of the 0.5 per cent base rate.

Concern over economic conditions that could leave more people needing debt help if they go on weakening prompted the move, with the committee noting the "underlying" rate of growth in the fourth quarter is set to be "close to zero".

This may suggest that if QE does not succeed in improving the health of the economy, the consequences will be more business failures, job losses and personal debt.

One possible concern about the increase in QE is that it will be inflationary, but the MPC stated that underlying causes of inflation are diminishing, such as commodity prices, with a prediction that the increase in the cost of living will decline in the months ahead.

This point was made again last night (October 18th) in a speech in Liverpool, by the Bank's governor Mervyn King.

He warned that action by the government and the Bank alone will not solve the key issue in the world economy, which he described as being "one of solvency not liquidity – solvency of banks and solvency of countries."

Mr King also said that for the UK, the eurozone crisis and its impact on both UK exports and the reduction of the deficit have "lengthened the period over which a return to normality is likely".

By Joe White
 

The Consumer Prices Index (CPI) measurement of inflation has hit its highest level in three years, new figures have revealed today (October 18th).

In September the rise in the cost of living jumped to 5.2 per cent, the Office for National Statistics (ONS) revealed, matching the level of September 2008.

Meanwhile, Retail Prices Index inflation – which unlike CPI includes house prices – was up to 5.6 per cent, the highest level since the 5.8 per cent figure recorded in June 1991.

According to the ONS, the situation was chiefly caused by the recent hikes in gas and electricity costs announced by the main energy suppliers, with transport and communications costs also a factor.

The cost of clothing and footwear was one factor acting as a downward influence, the report indicated.

With the cost of living going up, squeezed consumers may find it even harder than before to meet their monthly repayments, with the expense of paying off credit card and loan debt increasingly having to be met from dwindling resources as other costs go up.

Debt management plans may be useful in helping people to stretch their payments over a longer period and thus make them more affordable.

This may help customers see themselves through the hardest period of inflation, which the Bank of England has predicted would be the later months of 2011.

Its most recent Quarterly Inflation Report tipped CPI to hit five per cent on the back of rising utility prices, but it also said inflationary pressures will then fall back in the months ahead.

By James Francis
 

The debt consolidation measures many consumers are taking may ensure they have enough control over their debt levels to avoid the worst possible consequences arising from any further increase in inflation caused by the Bank of England's quantitative easing (QE) programme.

Independent financial advisor at Bestinvest Adrian Lowcock noted that if the £75 billion expansion of the asset purchases scheme has the effect of pushing the cost of living higher, "It could result in greater pressure on individuals paying off existing debt and push some over the edge."

However, he added: "On the whole, households are starting to reign in their debt and pay it off. Low interest rates and low mortgages have helped here."

People who are reaching the point at which they can no longer afford to clear their debts could find an individual voluntary arrangement (IVA) helps to get on top of such problems.

Unlike bankruptcy, it does involve still making payments, but these are reduced and the payment period will not exceed five years, after which anything left owing is written off.

In addition to this, it can be kept confidential, whereas bankruptcies may be published in the local press and are automatically logged in the weekly London Gazette.

Although some are concerned that QE will cause more inflation, the Bank of England's Monetary Policy Committee argued in its announcement of the new asset purchases that this will not be the case.

It said other inflationary factors are losing strength and that without more QE the economic weakness that would be suffered will see Consumer Prices Index inflation falling below its two per cent target.

By Joe White