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Loss of income named as main reason consumers need debt help
Tuesday 9th March 2010New figures from the debt solutions provider, EuroDebt, have shown that the main reason people are seeking help with their financial situations is “loss of income”.
From a sample of over 4,000 new cases from August 2009 to February of this year, EuroDebt found that 26% of those had fallen into debt due to loss of income, as redundancies remained rife and many workers were forced to take a pay cut or reduce their hours, leaving them struggling to keep on top of bills.
The second highest reason for taking out a debt management plan or Individual Voluntary Arrangement (IVA) was stated as “debt spiral”, as consumers found the common method of “robbing Peter to pay Paul” became too much to juggle.
Interestingly, 15% of those questioned admitted that poor financial management was the reason they had become indebted, which has led debt experts to urge financial advisers to offer help to their clients if they suspect that they are struggling.
Kevin Still, director of EuroDebt, commented on the figures, saying: “For the 3rd successive reporting period ‘Loss of Income’, including redundancy, has been the primary reason why someone has started a Debt Management Plan (DMP) with EuroDebt. There has been nearly a 2% increase in clients citing this as the main debt reason compared to the results from July 2009.
“Disposable income continues to be squeezed and we have seen that many employees have pay frozen, overtime stopped or working hours reduced. Costs continue to rise and many are now about to receive annual bills for council tax and water.
“It is encouraging that the percentage quoting ‘debt spiral’ as the main debt reason for seeking a debt solution has slightly dropped to 20%, but we fear that many people feel that they have to increase credit card debt and overdraft to meet monthly commitments. We hope that they will professional debt advice before their finances get out of control. The 26% year-on-year rise in Individual Voluntary Arrangements (IVAs) in the fourth quarter of 2009 seems to reflect that we will see more people who haven’t traditionally been in serious debt seeking help.”
Other reasons why consumers sought financial help in the last few months were divorce/separation (10%), physical or mental illness (7%), unemployment (6%), birth of a child (3%) and retirement (1%).
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