According to Credit Action personal debt in the UK has hit an awesome mark of £1.4 trillion mark with the staggering statistic that just today alone consumers are expected to borrow an additional £327 million.

The personal debt level has increased by £120 billion since last year. The overall £1.4 trillion owed comprises of over £1.1 trillion in secured on property while £224 billion is consumer credit such as loans and credit cards.

Excluding mortgages the average British adult owes £4,713 in unsecured debt.  Based on this level of debt the interest payments alone are £94.6 billion.  Credit Action has also calculated that UK personal debt increases by £1 million every five minutes.

If you are worried about being in debt then the first step is to face up to your situation and start taking action to deal with it.  You must never ignore the problem hoping it will just go away.

Debt Plan Direct recommends that you get in touch with every company you owe money to as soon as possible to explain your situation. If a creditor has written to you or sent a court summons then reply within the time period specified giving them all the facts about your situation.  If you require help at any stage with paperwork or any debt advice or perhaps your creditors are just not listening to your situation then get in touch with a Debt Plan Direct adviser who can act on your behalf to solve any issues.

Make sure you keep copies of all correspondence and keep up communications with creditors – they want to get their money back so it’s in their interests to help you repay the debt. 
 
Once you have a full creditor listing of all debts owing, you need to prioritise them.  For example, a mortgage or secured loan is a priority debt because if you fail to repay the money then you could lose your house or any other asset the loan may be secured against. Utility bills are also important because if you fail to pay these you could lose access to electricity, water or gas.

If you are racking up more debt on a high interest credit card then consider switching to an interest free deal on balance transfers.  Or if this is not a viable option then Debt Plan Direct can help to stop all interest and charges on any loans and credit cards through a Debt Management Plan.

PPI or Payment Protection Insurance is an insurance product that allows an individual to claim for the loan (whether the mortgage or personal loan) repayments to be made on their behalf if they become ill, lose their job or become redundant.
Recent research shows that this particular insurance cover is extremely costly and in may cases not beneficial to the individual claiming.

According to figures released by the Competition Commission banks make between £2.2 billion and £2.6 billion a year from PPI.  As a result the competition watchdog is investigating the market for PPI after the Office of Fair Trading decided there may be evidence of an uncompetitive market that disadvantages consumers.

The watchdog has also stated that banks selling PPI make a huge return on their costs of 982% and many lenders now rely on the sale of PPI insurance to enhance income earned from loans. The Commission said banks and other lenders would make no money from selling personal loans if they did not push customers into taking out PPI at the same time.

The Commission decided to investigate the market for PPI after the Office of Fair Trading decided that consumers were disadvantaged due to an uncompetitive marketplace.

Lending institutions are now becoming a lot more risk averse and turning down one in two people who have applied for a loan or a credit card as a result of the credit crunch.  Unfortunately this increase in rejections is set to increase even higher and as many as seven out of ten applications for credit are estimated to be rejected by 2012.

The large amount of personal debt in the UK which currently stands at a staggering £1391 billion (and continuing to get higher at an unprecedented level) has largely bee nas a result of the easy availability of credit.  However this previous train of ‘easy credit’ is coming to a steaming halt as banks and credit card companies tighten their lending criteria and become  a lot more responsible.

The problem for many is this culture many of us have grown familiar to this ‘buy now, pay later’ idea. Now if this easy credit train does stop this could result in a serious change in lifestyle for many people.  Furthermore, unfortunately it is a sad fact that some people rely on credit for their monthly living expenses just to make ends meet month to month and will suffer genuine financial difficulty should this easy credit train halt.

According to new research a majority of individuals in the UK are ‘financially overweight’.  The research, which was done by Abbey, suggests up to 43% of Briton’s are ‘overweight’ when it comes to their money situation.
 
The study shows that overall women are in a worse position than men.  It further suggests that 25 per cent have not shopped around to find the best price for insurance deals and up to 31 per cent could get a better more competitive rate on their mortgage.

“As many gear up to shift the pounds they pile on over the festive period, we would encourage people to review the financial products they hold and shop around to ensure that they are getting the most competitive deal available,” said Sue Hayes from Abbey.

“Like exercise, a financial workout can take a bit of effort but for most people the rewards are well worth the exertion.”

The Abbey debt report shows that 41 per cent of people have had the same current account for ten years while 16 per cent of people maintain a credit card balance paying their lender’s standard variable rate.

According to Credit Action, Britain’s personal debt now stands at £1.40 trillion and increases by £1 million every four minutes.

A debt report by Save the Children shows that those families on lower incomes are having to take out loans with door step lenders such as Privdent Personal Credit at amazingly high interest rates as extortionate as 200%. The money is then being used to pay for basic living expenses such as paying for enrgy bills.  The reprot further suggests that as many as 2.3 million people are taking out loans from door-to door salesman.

One of Save the Childrens poverty advisers, Mr. Jason Strelitz actually was bold enough to name Provident Personal Credit, which he advised offers loans of up to £500 at an APR of 183%.  Another doorstep lender is Brighthouse, which sells househod goods such as televisions and fridges on credit again at extremely high interest rates.  These companies target deprived areas of the UK to sell their loans.

Unfortunately the majority of the people who do tend to take out loans with these door-step lenders are refused credit by high street banks so have no choice but to take out these loans. High street banks do not lend to those with a high risk credit profile.

Jason Strelitz also said: “Doorstep lenders exploit poor families’ inability to get credit from more mainstream lenders, and they cover their risk in lending to the less well off by charging punitive interest rates.”

On average the cost of borrowing from a door-step lender varies but can up up to £285 paid back on a £100 loan- anything up to three times the initla amount borrowed.  According to the report approximately 165,000 of the UK’s poorest families borrow from illegal lenders or loan sharks to pay for their basic living expenses.

It has been found that the poorest families require an extra injection of cash around twice a year- during the summer holidays when children are off school and need extra meals as well as at Christmas when the heating has to be on all day.

As Christmas has passed and the new statements from credit cards and other bills begin to land it appears that more than 4.4 million credit card customers still have not cleared the debts from the Christmas in 2006, according to the research carried out by Money Expert.  There is approximately 10% of the adult population who still owe money on their credit cards for Christmas spending the previous year.

The age group most likely still to have money owing on credit card debt is the 35 to 44 years old bracket.  The credit card debt research shows that women are more likely to still be paying off their Christmas 2006 debts than men, with approximately 11% of women l struggling with their credit card debt from the previous year compared with 7% for men struggling with credit card debt.

On the flip side a healthy 54% did not get into any debt last Christmas or paid off any credit card debt within a month.  Any individual who uses a credit card as a form of unsecured borrowing for the long term should be extremely careful and to have a structured repayment plan to pay off any outstanding credit card debt.
 
Here are some useful tips if you still have credit card debt from last Christmas:

1 – Cut up existing cards – Stop making things worse by continuing to spend on credit cards and increasing the card debt further. Instead cut up the credit cards and stick to a budget you can afford and live on.

2 – Know your level of Debt – Calculate exactly what is currently outstanding on all forms of unsecured borrowing that you may have to get an overview of your financial situation.

3 – Get a plan put in place – Begin by paying off debts with the highest interest rates and not the highest level of debt as this debt is costing you the most.

4 - Allocate your resources - Money to pay off unsecured debt comes as a result of your monthly disposable income (after living expenses) or from savings.  It does not make sound sense to be paying high interest on credit cards if you have savings where the interest on the savings (after tax) is less than the interest you are paying on your debts.

Total UK personal debt at the end of October 2007 stood at £1.391 billion (bn).  The growth rate increased to 9.7% for the previous 12 months which equates to an increase of £122bn.

Total secured lending on homes at the end of October 2007 stood at £1.169bn. This has increased 10.5% in the last 12 months.

 Total consumer credit lending to individuals in October 2007 was £222bn. This has increased 5.8% in the last 12 months.
Total lending in October 2007 grew by £8.8bn.  Secured lending grew by £7.3bn in the month. Consumer credit lending grew by £1.4bn.

Average household debt in the UK is £8,920 (excluding mortgages). This figure increases to £20,741 if the average is based on the number of households who actually have some form of unsecured loan.

Average household debt in the UK is £55,877 (including mortgages).

Average owed by every UK adult is £29,311 (including mortgages). This grew by £250 last month.

Average outstanding mortgage for the 11.8m households who currently have mortgages is £99,090.

Two fifths of mortgagors have secured debts of over £90,000, up from one fifth in 2004.
Average interest paid by each household on their total debt is approximately £3,744 each year (this equates to ~ 9% of take home pay).

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,678 per average UK adult at the end of October 2007.

Britain’s personal debt is increasing by £1 million every 4 minutes.