Debt: The new addiction
The credit crunch has made life difficult for everyone. Shops are reporting reduced sales, restaurants have fewer bookings and unfortunately, many people are sliding inexorably into debt.
With widespread tales of the banks’ current reluctance to lend, it might seem that it’s now difficult to get into debt. But while the traditional providers of loans are being more cautious, new lenders are appearing who are ready and willing to offer short term loans – sometimes with true interest rates in excess of 1000%.
Thousands of people, from all sectors of society are now struggling to break the cycle of debt, in some cases arranging loans to pay the interest on other loans. Even more worryingly, evidence is starting to emerge (particularly in the USA) that some consumers are becoming addicted to debt, in the same way that others are addicted to gambling, drink or drugs.
The consequences for failing to deal with debt can be severe. It’s not just someone’s inability to obtain credit in the future – which could affect their chances of obtaining a mortgage or a car loan, for example. Being in debt can also affect employment prospects. Some employers, particularly those in the generic propecia financial services industry, are now required to check that potential employees are financially responsible. Other employers – fearing fraud or theft of sensitive information, make credit checks a condition of employment.
So what should someone do if they feel that their finances are spiralling out of control? There are two essential steps:
1. Don’t bury your head in the sand. It can be really hard to open that letter that you know is demanding money. But the situation won’t improve if you leave it on the mantelpiece for a month.
2. Get help – whether it’s from the local Citizens’ Advice Bureau or from an independent financial adviser. A good IFA will be able to help you with your finances and whatever you tell them will remain confidential. They’ll be able to help you take action before it’s too late and with their experience and wide range of contacts, they’ll know how lenders are likely to react to your problems. Most importantly, an IFA is wholly independent: the only item on his agenda will be what’s best for you.