What consumers can do in the face of rising debt and increasing interest rates

According to the National Consumer Council, Britain's personal debt has hit the £1 trillion mark for the first time ever - that's more than the entire external debt of Africa and South America combined. The reality is that people are starting to owe more money than they make; furthermore, data shows that borrowing is often based on "catching up" with expenses rather than over-consumption - suggesting that the UK's population is losing an ongoing battle to keep up with the rising cost of living.


About six million families in the UK are currently struggling to keep up with credit commitments - a situation which has led to rises in personal insolvencies, IVAs and bankruptcies. Moreover, interest rates are rising - a clear warning that consumers may be headed into even deeper trouble if they don't take greater care of how they manage their debts.


So what can consumers do to keep up in the face of rising prices while ensuring they don't fall into the debt trap? Furthermore, what options are available to those who have already found themselves in financial difficulty?

To begin with, it's important that consumers carefully consider all their options when it comes to borrowing money. For instance, while about 80% of the UK's borrowings are related to mortgages and re-mortgages, a total of £168 billion is still in unsecured form. And while secured loans require greater collateral to guarantee repayment, they also carry advantages which can outweigh unsecured loans in the long run. Secured loans, for example, offer lower interest rates and better loan repayment terms, such as extended repayment options or variable interest rates. This means that loan applicants have more savings options because they can choose how quickly they repay their loan.


The opportunity to repair credit scores is another advantage to secured loans: as long as borrowers make their repayments on time, lenders will continue to make positive credit reports to all the major credit reporting agencies. Applying for a secured loan also automatically increases a consumer's chances of qualifying to borrow money - even if he or she has had credit problems in the past.


In the end, a bit of good advice and rigid responsibility can help any consumer build, uphold, or regain good credit and financial stability. And while responsibility ultimately lies in the hands of the consumer, a comprehensive and qualified lender can help with the rest.