The number of people taking out a personal loan has risen dramatically in the last ten years. Until recently it seemed that people were not troubled by the amount of debt they were in, loans and credit cards were plentiful and refinancing was easy. However since the credit crunch, times have changed and personal debt is now becoming a burden drp. Recent figures suggest that the number of people struggling to manage their debt will double in 2008.
It is no longer easy to find good deals for credit, which has left people with no option but to continue paying their current loan provider, for the money they owe. The number of people who are currently struggling with unsecured debts is estimated at around one million, with the average amount owed being more than twenty thousand pounds.
The majority of people use credit cards as a way of securing credit, while a smaller minority use personal loans. Credit cards typically have much higher rates of interest than loans, but attract people with cheap balance transfer rates or interest free periods. However they cannot usually be used to obtain large amounts of credit, so people top up the amount by taking out two or three. This causes problems when people are no longer able to switch to lower interest rates or other special deals. They then are stuck with debt they cannot afford and have very few options for reducing it.
The struggle to manage debt looks like it could get worse before it gets better, with changes in the financial markets resulting in more cautious lending. The amount people can borrow, and at what rate is now completely different compared with a year ago. One option for managing debt was to refinance by remortgaging. This option is now restricted to a much smaller number of people who meet the banks new lending requirements. Bankruptcy is considered the end of the line but in the absence of other options we may see an increase in the number of people choosing to use it as a way out of crippling debt.