moneysupermarket.com: debt and insolvency in the UK

Commenting on debt and insolvency in the UK, Tim Moss, head of loans and debt at moneysupermarket.com, said: “People should be warned that IVAs are not a magic solution to their financial woes.

"Many of those who are always in the red with their credit cards and only ever make the minimum repayments on their bills will have little idea of how much this could cost over the long term. Indeed, recent figures from moneysupermarket.com reveal credit cardholders who only ever make the minimum repayments against a spend of £360 could be faced with a debt sentence which lasts until July 2017, and would pay and additional £322 in interest. It is shocking to imagine what the length of repayment and interest could rise to if this pattern of behaviour was repeated every month.

"For people suffering from spiralling debts an Individual Voluntary Arrangement might seem like an ideal escape route. However, an IVA is not a solution that should be entered into lightly and without thought. It is a serious financial agreement with creditors that will typically last for five years. Once entered into it will make obtaining any forms of credit, even for such everyday items as a mobile phone contract, almost impossible.

"There are many simple and practical steps people can take to get to grips with their financial situation before taking a drastic step such as declaring bankruptcy or entering into an IVA. People should first seek debt advice from one of the free advice agencies such as the Citizens Advice Bureau, then cut their excess spending and look to switch their debts to lower interest rate products to save some much needed money. Where circumstances allow, they should consider taking on part-time work to bring in extra cash.”

moneysupermarket.com has a debt solutions service which offers an exclusive guide to getting out of debt and provides links to many organisations that can offer additional support free of charge to anyone worried about their level of debt.

Tim added: “This service has seen a 70 per cent uplift since Christmas and we estimate a further 350,000 people will utilise it in the coming year. There has also been an increase of people to the loans site by nearly 100 per cent over the first two days of January in 2007 (compared to 2006) as people seek to switch their existing loan to a lower rate product or look to consolidate their different debts into just one, more easily manageable, amount. However, it is important to remind people of the importance of seeking advice on debt issues and I urge them to explore every alternative before declaring themselves bankrupt or taking out an IVA.”