Renters ‘struggling to manage personal debt’

Debt problems are causing an increasing number of renters to fall behind on their payments.

Research by The Money Charity has found landlords have been taking their tenants to county courts in England and Wales in an effort to have them evicted – nearly 70 per cent of claims result in some form of order.

Michelle Highman, chief executive officer of The Money Charity, admitted many people feel "trapped" within the rental sector, as they cannot afford to save a big enough deposit to get onto the property ladder. 

"This is in part due to the high level of rents they are forced to pay. That increasing numbers are unable to even sustain their rental payments is particularly worrying," she added.

Homelessness on the rise

A similar report by the Centre of Social Justice (CSJ) supports these findings, as it discovered more than 26,000 UK households have been accepted by councils as homeless in the past five years due to their arrears.  

Part of the reason that consumers are struggling with rental payments is the unsustainable level of money they owe. According to The Money Charity, in October average household debt was £54,124, while the daily amount of interest paid on personal debt was £162 million.

This is obviously a prohibitive amount and means many people are simply existing, rather than making a concerted effort to reduce their level of arrears through a sensible plan. With £1.53 billion being spent on credit cards daily, this problem could be set to get worse. 

Outstanding personal debt stood at £1.43 trillion at the end of October, which represents the highest level since September 2008 – the peak of the financial crisis. The figures also show there has been a steady increase in borrowing since 2004, when personal debt first broke through the £1 trillion mark. 

Speaking about the issue of indebtedness, the CSJ's director Christian Guy said he is particularly concerned by the situation. 

"Years of increased borrowing, rising living costs and struggling to save has forced many families into a debt trap that is proving very difficult to escape. Some of the poorest people in Britain are cut off from mainstream banking and have no choice now but to turn to loan sharks and high-cost lenders," he stated.

Seeking debt help 

For those struggling with arrears, a proactive approach is essential. By organising a debt management solution, they can take control of their situation and prevent it from getting any worse. 

If consumers owe more than £1,500 to more than one creditor, a debt management plan is a great way to reduce their monthly repayments. Typically, people will need to be able to afford a £100 payment every four weeks in order to qualify for the informal arrangement.

Those with more severe debt problems can consider an individual voluntary arrangement (IVA). This legally binding agreement allows adults to freeze interest and charges on all of their unsecured debts, while arrears that are not repaid during the IVA period – typically five years – will be written off. 

By James Francis