New figures from DEMSA member EuroDebt Financial Services reveal that nearly 1 in 4 (23%) of its clients fell into debt as a result of a loss of income. A further 23.5% cited spiralling debt, where they end up using one credit card or loan to pay off another, as the main contributor to their financial difficulties.
Analysing the period from April 2011 to March 2012 and comparing that with the previous year, the top five debt reasons amongst EuroDebt clients remain the same – Loss of Income; Debt Spiral; Poor Financial Management; Divorce or Separation and Illness. However, perhaps surprisingly, loss of income was a slightly bigger issue in 2010/11 at 26% than in the last 12 months. But overall, it’s clear from the EuroDebt figures that the financial landscape remains largely unchanged, as UK consumers continue to struggle with debt.
“Our figures show that ‘loss of income’ remains the top catalyst for the people we see falling into debt,” explains Kevin Still of EuroDebt. “This could be anything from one bread winner losing their job to having a pay cut or a reduction in work hours. Over one third of our Debt Management Plans (DMPs) are joint plans. With ‘debt spiral’ coming a close second and followed by ‘poor financial management’ it is clear that once someone gets into debt, with pressure on their finances from a variety of angles, it’s hard for them to manage their way out. We think that’s why so many people use one credit card or loan, including payday loans, to pay off another, highlighting the very real need for support.
“EuroDebt is a member of DEMSA whose code of conduct is approved by the Office of Fair Trading (OFT). We also have a unique model amongst the major commercial Debt Management Companies, in that we see all of our clients face-to-face. We are able to provide expert one-to-one help, support and advice to those in financial difficulty. Through face to face meetings and thorough review of an individual’s or household’s financial commitments, EuroDebt’s licensed advisers are able to provide professional debt and financial advice to enable people with the information they need to make an informed choice and get back in control of their finances in a realistic timeframe based upon their circumstances.”
One of the biggest changes in the EuroDebt reasons for debt results is the rise in consumers falling into debt as a result of poor financial management. In 2010/11, this was a problem for 13.4%, but this has gone up for the last 12 months to almost 15.5%. Divorce or separation also seemed to be a bigger issue in 2011/12, increasing from 8% to 10%.
Surprisingly though, unemployment has dropped from sixth place to seventh, down from 6.6% to 4.5% this year. Redundancy remains at the bottom of the table, but it has also dropped from 4.5% to being a debt issue for just 3.6% of people seeking help from EuroDebt.
“Whilst unemployment and redundancies have fallen slightly, there’s no doubt that many consumers need help managing their finances and taking control of their debts,” continued Kevin Still. “As the UK’s leading debt solutions provider offering face to face advice we help people take stock of their financial status and focus on putting plans in place to help them manage the monthly budget and find their way out of financial trouble.”