The Effects of Consumer Debt

Consumer Borrowing

Consumer borrowing in the UK has now crashed through the £1 trillion barrier. 80% of this is due to credit card borrowing, loans and mortgages. How are people managing to handle their debt and what effect is debt having on families today?


The National Consumer Council reports that 6 million families in the UK are already struggling to make repayments towards their debt, and Citizens Advice reports that over the last 6 years, they have seen a 44% increase in the number of people seeking debt advice. This may be just the tip of the iceberg. There must be many families in the UK who have debt problems, but are not aware of the free help and advice available.


Tackling Debt

According to a DTI survey carried out in 2002, a household is likely to be over-indebted if:


25% of your annual income is spent on repaying Creditors



50% of your annual income is spent on repaying credit and mortgages



You have 4 or more companies that you owe money to.


People find it difficult to make repayments for a number of reasons. Generally, the underlying cause is some kind of change in personal circumstances such as job loss, divorce, illness or a new baby. In these instances some people may resort to more borrowing in order to pay creditors or household bills. This is not always the best option.


Effects of Over-Indebtedness

The personal effect of struggling to repay debt can be far reaching. Sometimes a lack of financial awareness can lead to stress, depression, anxiety, mental health problems, relationship breakdown and even suicide.


Raising Financial Awareness

The Government recognise the need to raise financial awareness amongst the general public. The financial cost of debt is not only on an individual level, but there is also a cost to society in general.


People who experience stress due to their situation, will probably seek advice from their GP and may take time off work, therefore, this has an effect on already hard-pressed NHS and productivity due to absenteeism.


People who have had homes repossessed need to be re-housed, generally by the local Council. Those who seek legal aid due to debt issues also incur a cost to the taxpayer.


The Solution before the Problem

Will raising financial awareness alone tackle the issues of debt problems? It helps for people who are already struggling with debt, but are there other areas the Government should be looking at?


If you pay your creditors on time, regardless of what it takes to pay them, you are classed as a good payer and therefore, not a risk when it comes to additional borrowing. In fact, your finances could be in turmoil and you could be taking money from one card to pay another but you may still obtain even more credit.


The freedom creditors have to advertise loans, credit cards and mortgages could be challenged as well as how decisions are made regarding lending.


If people, who are currently in financial difficulty, find they cannot borrow more money, they should be made aware of the free financial advice that is available. Free Debt Management Companies such as Payplan can negotiate repayments with creditors so that monthly payments are reduced and become more manageable.

Nicola Bullimore

Debt and Your Dreams

You may not realize what that credit card bill is doing to you?

Bob is a 27 year old truck driver. He dropped out of college after one year and got a job. With hard work and good luck, he is making about $35,000 a year. Bob is passionate about remaining debt free. He drove his old car from high school until he could afford to pay cash for a newer one. He rented a cheap apartment until he saved a solid down payment on his house. Even during the lean months, he steadfastly refused to build up a credit card balance he couldn't pay off at the end of the month.

At 27, he's decided he's tired of his job and would like to change directions. By living within his means and staying out of debt, Bob has enough money in the bank to take some time off, get a part time job, and go back to school. He has visions of owning his own business one day soon - and there's nothing to stop him.

Now meet John. John is in his 40's and is in upper management with his company. He's making more than double Bob's salary, but he's had a different outlook on life. John has never been afraid of debt - he figured as long as he could afford to pay the bill he was ok. He has a very nice house, a brand new $40,000 car, lots of new sports and recreation equipment, and travels extensively on his vacations. And he's done it all on credit. John was living this lifestyle before he could afford it. Now, he's almost tapped out - his credit cards are maxed out, his house is double mortgaged, and even though he's making a great income, he has lacks the lifestyle, peace of mind, freedom, and opportunity Bob has.

Externally, anyone who saw the two would think that John is the greater success. But the truth is John is trapped. He may be tired of his job. He may want to do something else. He may wish he could spend more time with his family than at work or have a business venture he'd like to pursue. But he spent his money before he had it, and now he's paying the price.

Most of us think that the key to Financial Freedom is making a lot of money, but we see from our two examples that that's only part of the equation. The other part is lifestyle management and debt avoidance or debt elimination. If we plan wisely, stay out of debt, and control our desires to spend beyond what we can afford, we can enjoy a great amount of financial independence and have money to spend on things we really want to have and do, even on a very modest income.

However, for most of us, this message comes too late. Anyone buried in debt will agree that it would have been better never to get into debt. But that doesn't help much now. What we need now is some help undoing the mess we made.

Stay out of debt. If you're in debt get out. Don't take out another loan, declare bankruptcy, or sign up for credit counseling services, which can damage your credit. Instead, do your homework and educate yourself on the steps you can take to get back on solid financial footing, no matter what your present situation is.

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By Leonard Hopkins

How to Get Money When You Are Broke

(Money You Don't Have to Pay Back)


1. One way to get money is to have a yard sale and sell items
that you are getting ready to toss away because you don't want
them any longer.

2. You can always gather shells at the beach and polish and turn
into jewelry.

3. Get cash surrender from life insurance policy.

4. Paint faces on rocks and sell as paper weights.

5. Go to a pawn shop and pawn some jewelry.

6. Borrow from a relative.

7. Go get welfare pay or food stamps.

8. Dig small trees from woods and sell to homeowners.

9. Learn names of wild plants and plant in pots for sale.

10. Roll newspapers up in logs, tie, dye and let dry... then sell
(fireplace).

11. Cut up old shirts and dresses and make pot holders out of
them and sell.

12. Cut square towels out of old tossed out clothes and sell as
wiping rags.

13. Gather driftwood from the beach areas and sell to craft shops.

14. Paint old used wine bottles and sell as hand painted vases.

15. Go house to house and paint house numbers on curbs for a fee.

16. Take the lawn mower house to house to mow lawns for a fee.

17. Offer to dig or spade gardens for local neighbors for money.

18. Offer to sell fishing (earth) worms as bait - dig in garden
to get the worms.

19. Paint house exteriors in spare hours. Charge prevailing rate.

20. Gather pine cones and sell to craft shops.

21. Turn pine cones into useful jewelry, etc. and sell to shops
or houses.

22. Spray old building bricks gold, sell as "Fort Knox Rejects"
paper weight.

23. Paint bricks a vibrant enamel and sell as toilet bowl
displacements.

24. Fill coffee cans full of plaster, paint all over and sell as
door stops.

25. Gather vegetables from your garden and sell at road side stand.

26. Walk pets for your neighbors for pay.

27. Baby-sit for profits.

28. House sit for vacationers, get extra by upkeeping grounds.

29. Make fudge and sell house to house.

30. Do typing for fellow students or fellow workers for a fee.

31. Type menus for restaurants for a certain amount per menu.

32. Read books and do reports for a fee for students.

33. Research any subject (in library) for $25 a page.

34. Paint scrolls and designs on plates or make birthday plates,
charge $19 each.

35. Teach people to do calisthenics, charge $2 an hour and have
10 at time.

36. Teach dancing and charge $2 an hour, and have 10 at a time.

37. Learn to do juggling and clowning, put on shows for pay.

38. Rent out as a clown to birthday parties, affairs, etc.

39. Get good at telling jokes and rent out to night clubs.

40. Sing for money at night clubs.

41. Make crafts and sell them at road side yard stand.

42. Teach others to make crafts ($2 each) and have 10 at each
class.

43. Bake fruit pies and sell house to house (or in stores at
holidays)

44. Make Christmas wreaths during holiday season to sell, using
discarded boughs from your own and neighbors' Christmas trees.

45. Make Christmas candles from paraffin wax and sell at
Christmas time.

46. Polish shoes for office workers by going office to office once
a day every day and charge 50 cents a shine - lawyers best bet
here. Also see all accountants, clerks, insurance agents, etc.



By DeAnna

Are You Beating Up On Yourself About Debt?

When you hear the word "debt", whats the first thought or feeling that comes to you? For most people debt is "bad" or it becomes the "enemy" and is something that should be avoided like the plague.

Having debt does not make you a bad person. The more a situation is judged as being bad, the worse it gets. It's the judgement that you have around debt, that will keep you feeling "stuck". It's the judgement that brings out the anxiety, the fear, the stress, the knot in the stomach.

It's the old success principle: what you focus on expands. So what are you focusing on? Getting out of debt is an inside job first! What that means is taking 100% responsibility for your debts and admitting to yourself that you have an obligation, and knowing and believing that you will fulfill that obligation, by paying your creditors as quickly as possible.

No one wants to be stressed, or worry about living beyond their means. Most people are very uncomfortable talking about the subject of money and debt. And since the subject of money management is NOT normally taught in schools, where do we learn about it?

From our families, friends, co-workers etc, tv shows. These are people who mean well, and it's been my experience that they are usually passing along information that may be outdated, and no longer relevant for the times that we currently live in and may or may not apply to you and your life. It is THEIR opinions and beliefs.

Once again it doesn't make it a "good" or "bad" thing. The answer is to find a solution that "works" for you and your particular situation. Keep in mind, that once you decide to become debt free, it will become crystal clear that not everyone thinks that becoming debt free is a good idea.

Everyone from your local bank to your grocery store, want you to buy on credit. Realize that "credit" is a tool that can serve you, or NOT serve you. Here are some tips for becoming debt free.

1) Admit that you have debt, and are willing to become debt free. This is the most important step and is part of being 100% responsible, and being open to finding a solution. Without knowing where you are now, you are probably not going to be able to plot out a plan or map to where you want to go.

2) Don't add any more debt. This is all about changing habits, beliefs, and attitudes about buying on credit. Your attitudes about money/credit may have served you up to this point, and the good news is that you can now make new choices that support you. Remember "life" happens and there may be times when you may have to use credit. If this should happen DON'T beat yourself up. Just continue down your path of debt reduction and the ultimate goal of financial freedom.

3) Start to pay off the debt NOW. This seems like an obvious and simple step, and it's simple to do and also simple NOT to do. Afterall we are human beings, and change is not something that we are very comfortable with. Put all your debts on paper, so that you are clear about what you owe. One of the best strategies to debt reduction is the "something-something" principle. Focus on paying (1) creditor off at a time. This will keep your energy concentrated, and your debt reduction efforts will be more effective, than trying to pay off everyone at one time.

4) Take "extra" money and apply it toward your debt. Where can you get the "extra" money? Start to watch where you spend your money. For example: using coupons, or shopping at a warehouse club, can save you thousands of dollars over the course of a year. These savings can be used to pay down your debt quickly and effortlessly.

Keep in mind that your past doesn't equal your future. Look at your current financial situation as a "learning" experience, and an area that you are able to improve on....versus a place that you are judging yourself for a mistake. Many people just like you have been able to eliminate their debt. The good news is....so can you!!!!


By Mario Castagno

Worried About Debts?

Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?

You're not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn't have to go from bad to worse. If you or someone you know is in financial hot water consider the options below. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Developing a Budget: The first step toward taking control of your financial situation, is to do a realistic assessment of how much money you earn and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses - those that are the same each month - like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary - like entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education. Your public library and bookstores have information about budgeting and money management techniques.

In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your cheque book, and creating plans to save money and pay down your debt.

Contacting Your Creditors: Contact your creditors immediately if you're having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you. Managing Your Auto and Home Loans: Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Debt Consolidation: If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer.

Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a consolidation loan?

Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.

Secured on your UK home, low cost, low rate, cheap, low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment - one calculated to be well within your means.

With a Debt Consolidation Loan you can borrow from £5,000 to £75,000 and up to 125% of your property value in some cases.

A UK Debt Consolidation Loan is a low cost loan secured on your UK home. It frees up the spare capital (or equity) in your home to repay your store card and other debts.

It can reduce BOTH your interest costs AND your monthly repayments, putting you back in control of your life.

Debt Consolidation Loan rates are variable, depending on status Your monthly repayments will depend on the amount borrowed and term.

You may freely reprint this article provided the author's biography remains intact:

By John Mussi

Debt Consolidation and Personal Finances: Learn the Truth!

An inability to manage credit, growing debt and bankruptcy are all major problems today. On an average day, over 8,000 people file bankruptcy in the United States alone. The Internet is rife with companies that promise help and salvation; to the uninitiated, their words and assurances prey upon those wanting a painless solution.

The January post-holiday credit card bills are often the proverbial straw that breaks the camel's back, where families now have to face the problem of how to pay for the holiday gifts and celebrations without sliding further into debt.

Avoiding these problems, and recovering from overwhelming debt, are what Real Life Debt.com is all about: it's a resource site that's dedicated to helping you learn about your options with credit card debt, debit cards, debt management, debt counseling, privacy, deciding about bankruptcy (and the different types of bankruptcy), and more.

Founder Dave Taylor explains "As a private, independent initiative, we're sure that you'll find Real Life Debt.com to be an excellent resource for understanding and managing your own financial issues. To ensure accuracy, the materials on this site are all from the United States government: one goal of Real-Life-Debt.com is to help people find the excellent material produced by the Federal Trade Commission, Federal Reserve, Consumer Information Center, and similar organizations."

In addition, Real Life Debt also features a weblog (a "blog") with postings from different individuals who share their own challenges managing their personal finances, including bankruptcy, credit card penalties, and much more.

Real Life Debt is an unbiased source of credit card, debt management, privacy and bankruptcy information, without commercial sponsors or a sales pitch. To ensure accuracy, much of the material is from U.S. government sites.

By Dave Taylor

Dont Let The Good Times Bury You

ÿþIt is vital to get rid of debt while things are going well. Yet the opposite is usually the case. Human nature is such that when we find ourselves living in good times, we let down our defenses. With our lives going great we seem to make the worst decisions. It's not hard to understand why this happens. We believe things will always be better in the future, "When I'm done with school, When I get a better paying job, I'm sure I will get that promotion."

With this attitude, that extra lump sum of money, or the raise at work, is used as a springboard to increase your personal debt. After all you can now afford better this, bigger that. You assume in your linear view of life that tomorrow will take care of everything. You don't become concerned with your debt load, until you no longer can make the payments.

When you begin to feel the squeeze of debt, you want some quick fix to get you out of trouble. Unfortunately there are no quick fixes for debt that will leave you (or your credit report) unscarred.

But why should it be any different from other areas of your life? If you know a food will give you heartburn you take a pill and, "presto," you may eat any thing you like. If you can't find time to exercise, just take a pill and watch those pounds melt away.

The economy is built on the same "I want it now," principle. If you want an item, you just whip out the plastic. You need it now. You will figure out later how to pay for it. When your plastic can take no more, you want out of debt in an easy way. You begin looking for the magic pill. Unfortunately the drugstore closed a long time ago.

A woman, who I know casually, had no problem taking on more debt because she saw herself able to handle the extra payments. She reasoned, if everything remained the same she could handle the drain on her income. So she bought some expensive gift items on her cards and began making the monthly payments.

She found out rather quickly she could not see into the future very well. Her car gave out on her. The repairs exceeded the value of the car. She needed one for work, so she bought another.

The new payment wiped out the tiny cushion she had each month and also made it impossible to pay on her credit cards and store accounts. Today she finds herself hounded by her creditors and unable to pay them anything.

What she should have done, and what you should do, is pay off your debt while you can and not take on any more. Whatever extra you have each month should be applied toward getting out of debt in a systematic way. Until you are debt free, you should order your life to make it a top priority.

Life's pressures are more easily handled without money worries dogging you. Then when those big promotions, with those big raises come along, you will be trained to put some aside. And without debt to take care of, you can. The goods times then, truly, will be the good times.

By David Wilding