Disposable income decreases

The total average amount of debt has decreased steadily - although disposable incomes have dropped and it's taking people longer to become debt free, according to the latest Chiltern Debt Monitor.

The study found that the amount people have left to spend each month, once living expenses are accounted for, has dropped by almost ten pounds and it is taking an extra three months to clear debts, compared to August 2007.

This means that people in debt can realistically only afford to pay a quarter of their contractual credit commitments each month, down 1 per cent.

However, people owe £1,274 less each on average than they did in August of last year, down from £26,662 to £25,388.

Chiltern's Nathan Gladwell says: "Our figures show that people are applying the brakes sooner with their spending, or seeking help earlier than they were previously which is a positive sign.

"Times have been hard for people struggling to make ends meet, as the credit crunch and higher living costs have reduced options and diminished available income.

"As a result, people may be using overdrafts and credit cards to pay for everyday living, which is how many debt problems start - as each month they go further into the red.

""Anyone experiencing financial difficulties needs to readjust their spending to more realistic levels and be open to alternative options, like informal arrangements.

"These could help in the short-term whilst finances are brought under control, as debts are prioritised - so mortgage or rent and utility bills are accounted for first."