A Vicious Circle

There are a number of reasons why people fall into debt, some cultural and some legislative.  Debt has become both easier to accumulate and less stigmatised.  The easy availability of credit over the past years backed by rising house prices, led both lenders and borrowers to believe that uncontrolled credit was a good thing that would never end.  This period of credit-fuelled economic growth ended with the economic downturn and the overall impact is still to be fully determined.

”A return to the status quo would be great but unlikely.  What could be achieved is an era of more sensible lending, which is less reliant on rising property values and more attuned to income and creditworthiness,” said, Gerald Irwin of Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency.

For those who embarked on a spending spree during the good times, much of their indebtedness has yet to filter through.

”Many people, already in debt, are facing growing financial pressures due to external factors and there is real concern that the only lenders interested in providing future finance for previously bankrupt individuals are the ones with the highest interest charges and the most punitive costs for lending.  The serious long-term implications suggest the creation of a cycle of indebtedness which could span generations to come and consign thousands of people to a life of debt, bankruptcy and yet more debt,” added Mr. Irwin.