Redundancy forces 1 in 5 to seek debt help
One of the main debt management providers in the UK, EuroDebt, has published its report of the reasons for clients signing up to its debt management plan during 2008. Based on a sample of over 7,000 clients during the last year, EuroDebt found that just over 20% said they needed help because of a loss of income or being made redundant.
Director Kevin Still believes these figures show the real impact of the downturn over the last year, in particular with many facing a cut in their income through loss of overtime or even redundancy whilst the cost of living significantly increased during the year.
“2008 was a real rollercoaster of a year for those who were already struggling with their finances,” explained Mr Still. “Many families and individuals needed professional help and a flexible debt solution, which is what a debt management plan can provide.”
Loss of income or redundancy was not, however, the highest reason for individuals and families turning to EuroDebt. Nearly a third of clients who signed up to a debt management plan had simply got to the end of the road in coping with a spiral of debts.
“I believe our figures reinforce other reports that suggest debt is cutting through every section of British society,” Mr Still continued. “A recent report from Grant Thornton showed an increase in the number of middle-class families being caught in the debt trap as house prices continue to fall and job prospects diminish. Dropping property prices have cut off access to additional funds for many homeowners who previously relied on remortgaging to pay off credit-card debts and personal loans.”
Poor financial management – at nearly 13% - was the third top reason for turning to debt management, which Mr Still believes is also related to the significant change in the economic conditions during 2008. “A number of clients blame themselves for the situation they face in terms of unpaid debts. But the reality is that, for many, they simply couldn’t cope with the juggling act needed when using credit to pay off credit – especially as the availability of credit was so markedly reduced in the aftermath of the credit crunch.”
Other reasons included divorce or separation (12.7%), unemployment (7.2%), illness (2.4%) and retirement (0.61%).
Article sourced from www.debtmanagementtoday.co.uk 25/02/2009
