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Small Debts, Big Problem

Inflation Eating Surplus Income As Small Debts Become A Big Problem

Small Debt Big Problem - Debtors are on the edge.

Indebted homeowners are the hardest hit by rising inflationary costs, reveal Payplan, the UK’s leading provider of free debt solutions. With annual inflation hitting 4.4% in August and expected to rise further with tomorrow’s September announcement, their surplus income has reduced to only £270 a month*.

Using Credit To Pay Mortgage Or Bills

Today the average homeowner calling Payplan for help owes over £40,000 in unsecured debt, compared to the average £27,000 owed by renters. Despite an average household income of £2,200 per month, indebted homeowners are left with an average of only £270 of disposable income a month with which to repay their debts. This is often far below the amount needed to service monthly debt repayments, and before seeking help they will have missed repayments – often to their mortgage lender – or been living on credit. A survey of new callers to Payplan last month showed that 50% had recently used a credit card to pay their mortgage or a utility debt.

Small Debts Now Unmanageable

Juggling credit is less easy as small debts become a big problem

The consequence of having only £270 a month in disposable income means that any inflationary price increases has a catastrophic effect on budgets. Many lines of previously available unsecured credit have been withdrawn in the credit crunch and small debts that were previously dealt with by juggling credit are now becoming unmanageable much faster.

Income Squeezed By Inflation

John Fairhurst, Managing Director of Payplan, commented:

“Homeowners increasingly have to face up to the reality that after living expenses, there isn’t enough money in the kitty to pay off their debts. As lenders become more cautious about providing consumers with credit cards or personal loans, we have found the average levels of unsecured debt dropping. This is not, unfortunately, due to people managing their money better, but simply that even small debts are now proving unmanageable. Rises in inflation mean that surplus incomes are squeezed even tighter, leaving people on the edge tipping over at a faster rate.”

*The surplus income for a household is determined when essentials such as housing, food, medical and transport costs have been deducted.

Payplan Press Office

For further information please contact:

Jane Jenkins,
Payplan PR Manager
Email: jane.jenkins@payplan.com
Telephone: 01476 581 279

NOTES TO EDITORS
All figures are internal Payplan numbers.

About Payplan – Payplan provides free, ethical and immediate debt help to over 100,000 people every year, working closely with organisations in the field of money advice and consumer and employee welfare.

Freephone 0800 280 2816 six days a week to speak with an experienced debt adviser. Lines are open 8am to 9pm Monday to Friday and 9am to 3pm on Saturdays. Or submit your debt enquiry online.

Written by on September 15th, 2008

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