Monday 2nd of November 2009
Britons are forced to cough up more than £66 billion in interest repayments each year, new figures reveal - cash which could be put towards paying off debt if an individual voluntary arrangement (IVA) is taken out.
The Credit Action report for November also shows that the average amount of interest paid by each UK household is £2,654 every 12 months.
Recent reports have highlighted that, despite the Bank of England’s base rate crashing to an all-time low of 0.5 per cent, the interest rates demanded by many credit card companies have risen.
And with the typical British adult now owing £4,745 in unsecured loans - such as credit card bills and overdrafts - a hefty interest rate could see that debt spiral out of control.
In the middle of the credit crunch simply finding interest payments could be a challenge for many families - and that is before the debt is eaten into.
But an IVA could be one solution to such debt concerns, as the financial rescue package can freeze interest rates on what a consumer owes.
This may be good news to debtors who are struggling to find their repayments each month or wish to prioritise other borrowings - such as a mortgage - in the current economic climate.
An IVA could also negotiate repayments with creditors so that what is paid back can be changed to reflect what a person can afford to pay.
By Mark Waterman
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVAs could help households with an out-of-work adult
