Article Categories
» Arts & Entertainment
» Automotive
» Business
» Careers & Jobs
» Education & Reference
» Finance
» Food & Drink
» Health & Fitness
» Home & Family
» Internet & Online Businesses
» Miscellaneous
» Self Improvement
» Shopping
» Society & News
» Sports & Recreation
» Technology
» Travel & Leisure
» Writing & Speaking

  Listed Article

  Category: Articles » Finance » Loans » Article

Is the UK obsession with loans out of control or are personal debt levels "comfortable"?

By Richard Green

Since the 1990s, when the average homeowner owed around £31 thousand, levels of personal debt have nearly trebled to £84 thousand. However, according to the Alliance & Leicester, UK personal borrowing levels are at present "comfortable".

At a time when personal debt in the UK exceeds £1.3 trillion on mortgages, credit cards and other loans; with unsecured credit card debt on the increase; and the number of personal bankruptcy declarations hitting an all time record high, this type of statement may seem to be inaccurate and perhaps even inappropriate. However, Chris Rhodes, the Managing Director of the Retail Banking sector of the Alliance & Leicester, believes that much of the bankruptcy situation is primarily due to changes in financial legislation which has occurred during the past few years, making declarations easier, and that personal debt is really under control.

This assertion has been made amid a rise in incomes which means that the servicing of this debt in 1990 used up to 33% of the borrower's income, whereas today only it requires about 20% of the borrower's income. In absolute terms this is seen to represent an increase in the general affordability levels required to maintain the current intensity of personal loans.

In a BBC interview, Chris Rhodes did state, however, that it would not take much of an increase in the debt-to-income balance to occur before the situation becomes significantly more worrying, and he urged consumers to moderate their behavior over the next 12 months and take on less debt as compared with the last four years.

In light of these increases in personal debt over the last few years, Keith Stevens, of the chartered accountants firm Wilkins, last year sounded a warning note:

"Creditors profit by lending money to people and collecting interest, and the longer they can keep that cycle going the better for them. Unless borrowers own property of significant value, it's often not in creditors' interest to call in their debts."

Mr Stevens also stated that he believed some creditors were increasingly taking a hands-off approach, allowing debtors to pile up large amounts of debt and then collecting interest and penalty charges for as long as borrowers were able to continue paying. This has lead to an increase in the number of borrowers filing for bankruptcy themselves when previously they would have been forced into it earlier by their lenders.

Independent financial adviser, Alan Steele, believes that:

"Debt has always been a problem for a minority of people. One of the current problems is the willingness of bank managers to hand out loans and credit cards, which means this minority has increased, but the majority are coping with their debt."

Free information on loan rates, from comparison websites like Moneynet or Motley Fool can help locate the lowest rates for loans and thereby reduce the overall financial burden of incurring high interest charges. But more responsible attitudes to personal finances are also required from both the borrowers and the lenders, alongside improved consumer protection legislation.

Where once the UK was seen as a nation that held up thrift as being a virtue and considered debt a vice, it has now completely changed to a nation that lives on borrowing.


All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.

Useful resources:

Motley Fool
About the Author
Richard lives in Edinburgh, occasionally writing for the personal finance blog Cashzilla, and talks to himself a lot.

Article Source:
If you wish to add the above article to your website or newsletters then please include the "Article Source:" as shown above and make it hyperlinked.

  Some other articles by Richard Green
Arizona's Biltmore Fashion Park: "this place is hot"!
The Biltmore Fashion Park, located just outside Phoenix, boasts a variety of exciting cafés and restaurants; so when you're browsing its numerous retail outlets, you're sure to find something to satisfy your stomach's urges. As the ...

Underground Atlanta: successfully mixing history with a modern retail experience
Atlanta, Georgia, is one the Deep South's most important and most interesting, cities. Its origins lie in the extension of industry and the expansion of the American railroad in the 19th century, beginning as ...

The invoice finance sector is showing positive growth according to the latest figures from the Factors and Discounters Association.
According to the latest figures from the Factors and Discounters Association (FDA), the invoice finance sector of the UK Asset and Sales Finance Market has seen nearly £13bn advanced to more than 45,000 UK companies. ...

Take a weekend theatre break in Britain
The number of weekend breaks people take in today's modern world has increased considerably over the last ten years. Instead of spending weekends at home, young, working individuals have been ...

Why you should always use the correct motor oil in your car
Motor oil, coolant, clutch, transmission, power steering, and brake fluids are all vital parts of all cars. They need to be regularly checked, ...

Canon introduces All-in-One colour toner cartridges.
With the release of the new Lasershot LBP-5000, Canon have introduced their first colour toner printer to feature all-in-one cartridges. We compare this new concept colour toner printer ...

  Recent Articles
One Hour Cash Advance
by Peter Hughberry

Solve Your Debts With Credit Card Debt Management Plan
by Elaine Owen

Approves loan amount faster - Online personal loans
by Ashley Lewis

Cheap Car Loans Uk:Grab The Opportunity To Buy A New Car!!
by Aldrich Chappel

Get Bad Credit Unsecured Loan with No Hassle in UK
by Anton Gabriel

For The Van Of Your Choice: Used Van Finance
by Bonnie Castle

Finance on Low Rates Is Possible Through Personal Loans
by Peter Taylor

Secured Loans- Money at reasonable rates
by Joanne Clive

The dos and don'ts of adverse credit car loans
by Joanne Clive

Redeem your business ideas with business loans
by Angelo Drew

Unsecured personal loans: Easier and convenient
by Elizabeth Swann

Low Rate Secured Loan: Avail The Benefits Of Low Rates
by Aldrich Chappel

Can't connect to database