Debt Consolidation Can Help Borrowers to Budget
After a survey showed many people in the UK regularly 'overspend', potentially putting them at risk of debt problems, Debt Advisers Direct said that shoppers should attempt to set themselves a strict budget to help protect against falling into debt, especially in the run-up to Christmas.
The company added that some people with multiple debts could make their finances easier to manage with the help of a debt consolidation loan.
The survey by the Co-operative Bank revealed overspending amongst a high proportion of British consumers. 51% said they were most likely to overspend at Christmas, with 35% saying the same for birthdays; 34% overspend on holidays; 22% overspend on 'unplanned shopping sprees'; 21% on nights out with friends; and 19% on clothes.
However, the survey also found that the economic downturn had made people more financially disciplined on the whole. 72% of consumers said they now spend within their means, while 67% said they had set themselves a budget, and 86% said they regularly checked their bank statements.
Finally, the Co-operative's survey found that people currently save an average of £219 each month - but also spend an average of £195 on unnecessary things.
A spokesperson for Debt Advisers Direct said that although the survey revealed some positive signs about consumers' attitudes towards managing their finances, the levels of overspending are a cause for concern.
"Regular overspending suggests an over-reliance on getting into debt to fund purchases, which is a very risky way to do things. Making purchases on credit is fine providing the borrower knows they can afford to repay it, but the levels of overspending seen in this survey suggest that this is not always the case.
"The risk is that any unexpected costs, or indeed the borrower's existing costs, could stop them repaying the debt as quickly as they had planned, which can allow the debt to grow. In the worst-case scenario, that debt could get out of control and become unmanageable.
"We advise those who don't already stick to a budget to create one as soon as possible, and to do their best to stick to it. For those who can't, it's important that they speak with an expert debt adviser to discuss their options for getting out of debt."
The Debt Advisers Direct spokesperson added that many people who find themselves regularly overspending may be doing so due to existing debts.
"A lot of overspending is down to the pressure of existing debts, and it's important that struggling borrowers address this problem.
"For people with relatively manageable debts, a debt consolidation loan could help. Debt consolidation can actually help people to budget, since it's possible to reduce the repayments to a more manageable level, and because it means just one monthly payment instead of many. That said, reducing the payments will mean repaying the debt for longer, which can cost more in interest overall.
"However, debt consolidation may not be suitable for people who are already struggling to meet their monthly payments. For that kind of situation, a debt management plan or an IVA (Individual Voluntary Arrangement) might be more appropriate."
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