In its latest report the Financial Policy Committee of the Bank of England has again expressed concerns about the level of consumer debt.
Although only a small percentage of mortgage leading, personal loan and credit card debt is more problematic for lenders when things get tough because most consumers prioritise regular bills and mortgage payments over loan and credit cards.
Part of the reason for this is that there are greater repercussions for debtors who default on mortgage and utility bill debt that on credit card payments.
You can repossess a house when mortgage payments are in arrears but you can’t get blood out of a stone when credit card payments are missed and the person missing the payments has no money.
So it’s natural that with a fixed, and limited, budget consumers would continue to make mortgage and utility bill payments while ignoring credit card bills. And ‘ignoring’ is an important word here.
Contrary to what many people think, most lenders do want to help people who get behind with payments. But they can only help them when they are aware of the problem. So it’s crucial that if you think you are going to be unable to make regular payments on loans, credit cards or other debts, that you call your lender as soon as possible.
It’s a lot easier to come to some agreement two weeks before you can’t afford to make a payment and when you account is up to date, than it is six months later when you haven’t made a payment and haven’t told anyone that you have a problem.
It’s not easy to admit to your creditors that you have a problem and can’t pay them but you need to do it. Your creditors can’t help you if you don’t tell them you’re in trouble. Neither will they judge you just because you think you might be getting behind with payments.
Most people who get into arrears do so when their circumstances change through no fault of their own. Divorce, separation, redundancy or illness are the main causes of changes in circumstances that makes today’s affordable debt unaffordable tomorrow, and these changes can hit anyone at any time.
So if you are struggling to keep up with loan repayments don’t keep it to yourself. A problem shared is a problem halved!
