The average level of debt owed by a customer on a Chiltern debt management plan is down by over £1000 pounds since the beginning of 2008 and currently stands at its lowest amount since the Chiltern Debt Monitor started in 2007.
However people can afford to repay less than they could at the beginning of the year, despite overall debt levels dropping, as the amount customers can afford to offer creditors each month is also down to just 25 per cent of the original contractual payment.
One of the main factors of this is the increase in monthly living costs, partially due to rises in food, energy and petrol costs which have increased customer’s monthly outgoings (up by £22 each month from January ‘08), and reduced the amount of disposable income by 5 per cent (down £11 each month since January ‘08).
Chiltern’s Donna Leigh says: “This year has seen a steady reduction in the total amount of debt owed, but it is now taking someone on a managed account an extra 5 months to repay what they owe, compared to at the beginning of the year.
“This is mainly because the living costs have squeezed household finances harder and reduced the amount of money available to repay debts each month.
“The reduction of available money each month then causes people to turn to credit to pay for essential items, which causes a downward spiral of debt – as each month sees them going further into the red.
“Anyone experiencing financial difficulties needs to readjust spending to more realistic levels and seek advice sooner rather than later from an Office of Fair Trading code approved debt solutions provider, like Chiltern.”