2 million people in UK have 5 figure debts

THURSDAY, APRIL 20, 2006

A survey commissioned by One Advice has found that nearly 2 million people in the UK have unsecured debts exceeding £10,000. Most of the debt is in the form of credit cards, bank overdrafts and other types of unsecured loans including money borrowed from family and friends.

About half a million people in the UK have debts of more than £20,000.

There were variations on debt levels according to age, with the 35 to 44 age group having the highest level of unsecured borrowing, with an estimated 650,000 people owing £10,000 or more.

For the 18 to 24 age group; about 1 in 20 owed in excess of £10,000 in unsecured loans.

Such high levels of personal debt are having consequences for individuals in the UK though. In 2005, 70,000 people were made insolvent, which for the majority led to bankruptcy. In any case most will have difficulties borrowing money in the future.

Others were able to take advantage of an IVA (individual voluntary arrangement), whereby they were able to avoid bankruptcy by negotiated a reduced payment to their creditors. After the period of duration of the IVA (usually five years), the individual is left debt free.

The problem with unsecured debt is that interest rates tend to be higher leaving people trapped in a debt crisis, only managing to pay off their loan interest rather than their capital. For anyone with debt issues or problems, free debt advice is available.