One of the reasons some consumers are in severe debt is unemployment, with many who were able to manage repayments suddenly finding this impossible af…
One of the reasons some consumers are in severe debt is unemployment, with many who were able to manage repayments suddenly finding this impossible after losing their jobs.
Without the income to pay back what is owed, arrears can soar and while some lenders may be forbearing, the fact is that unless the money is written off, a lot is left to pay.
One example of how this can work is where a consumers still manages to pay the minimum on their credit card but no more than that, with more interest being charged the longer it takes to clear a debt.
And with some people having several cards, this could be a susbtantial sum.
The risk of unemployment is, of course, greatest in times of recession or low growth. In the case of the UK, recession hit hard in 2008-09 and most of the time since has been characterised by low increases in gross domestic product (GDP).
However, in both 2010 and 2011 the final quarter saw the economy shrink and the latest data from the Office for National Statistics has revised the contraction for this period from 0.2 per cent to 0.3 per cent, meaning the economy did worse than originally thought, with overall growth for 2011 of just 0.7 per cent.
And the prospects for this year are somewhat varied, according to the Bank of England. Like last year, a big royal celebration is in the offing and according to the Bank's governor Sir Mervyn King, this will have a negative effect on output due to the additional bank holiday.
Speaking to the House of Lords' Economic Affairs Committee, he said this could lead to negative growth between April and June.
However, there will not be a recession this year – with overall growth of one per cent – because the second and fourth quarters will see increases in GDP.
But for Britons struggling with their card and loan repayments, it could mean debt management plans or even individual voluntary arrangements will need to be considered.
Posted by Paul Thacker