Whilst Father Christmas is a fabled character created solely with the intention of creating a magical atmosphere over the festive season for children, many individuals are coming to learn of the more sinister side of this legend. Considering the poor state of the economy, there is an increased pressure upon individuals to continue the façade, however the means of which to finance these have typically reduced. With the recent figures detailing that over 4.5 million individuals have yet to clear balances accrued twelve months ago, this festive period could prove to be more financially stressful for many.
Paying consideration to the present situation that the UK economy is in and the new proposals for credit card lending with their stricter repayment regulations, there is arguably a potential increase in financial difficulties arising as a consequence. What are the implications of these prolonged credit card debts and are the attitudes towards consumer credit stifling sensible financing for the festive period?
It can be appreciated that the poor state of the economy over the previous twelve months has affected many individuals’ capacity to effectively finance and has had a dramatic set of consequences on factors contributing to accumulating savings. Taking into account the significant rise in instances of prolonged unemployment and substantial increases in statistics documenting personal insolvencies in the forms of Individual Voluntary Arrangements (IVAs), Bankruptcy and Debt Relief Orders, it can be understood that the saving of funds for Christmas may not have been possible in many cases.
The difficulty now faced by the 4.5 million individuals who have failed to fully repay debts accumulated from twelve months ago is that placing any subsequent balances for this festive period on facilities of consumer credit will exacerbate existing interest from last year. This consequently results in a balance that compounds interest, making the balance harder to repay, the overall amount larger than the items originally purchased and the length of time potentially taken to clear this amount owed longer.
This situation can often be seen to represent the slide into significant credit card debt and, in addition to the reforms proposed to alter the minimum payments on credit card balances, debt advice companies are warning that caution needs to be exercised about knowingly purchasing outwith particular means of repayment. It is widely recognised throughout the insolvency industry that there is a pressing requirement for accurate information for individuals finding themselves in situations of unmanageable debt.
In support of maintaining regulation amongst the wealth of advice offered to individuals by unfettered companies, IVA Watchdog have issued a reminder that when exploring options of agreements that aim to eliminate debt, a good company will fully consider an individual’s circumstances. A spokesperson asserted that many individuals contacting their call-centres seeking advice were already in unsuitable debt arrangements that were not being supported in their attempt to become debt free.
It is crucial for individuals to be presented with the correct information on any debt solution, such as an Individual Voluntary Arrangement or a Debt Relief Order, and for a full assessment of both situation and circumstances to be undertaken before entering into any form of debt solution agreement. The IVA Watchdog have issued advice that any reputable company will provide independent, professional advice and will not pressure individuals into unsuitable agreements.
This article was composed by David Brown on behalf of debt advice website – a website offering free, no-obligation information, guides and tools on matters of debt and financial difficulty.