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Average debt is falling for Debt Management customers

23 April 2008 / by Rachael Stiles
The average debt level of customers on informal debt management plans is at its lowest since the Chiltern Debt Monitor began.

Chiltern has found that the average debt of someone on a debt management plan is down by almost £400 since the beginning of 2008, illustrating that people are taking affirmative action to tackle their debt problems sooner, and preventing themselves from getting further into debt.

The average debtor, aged 44, now owes £25,945 – below £26,000 for the first time since Chiltern started its debt monitoring service – they have an average of eight creditors, and will take 146 months to become debt free.

However, Chiltern has voiced concern that as people's disposable income drops as household expenditure on food and fuel bills rises, those in debt will be but under additional pressure to keep up with their repayment plans.

The reduction in the availability of credit, as mortgage lenders, loan and credit card providers also feel the pinch of the credit squeeze, will help to reduce the amount of debt that people get into, but it is simultaneously depriving them of a way to make ends meet at a time of financial crisis when budgets are stretched to breaking point.

There have been 30 per cent fewer home loans offered this year compared with the same time in 2007, according to the Council of Mortgage Lenders (CML), and 100 per cent mortgage deals are no longer available, making it increasingly difficult for first time buyers to get on the property ladder.

"The current climate is encouraging more people who are struggling with their finances to seek alternative options, as credit becomes harder to get hold of," said Nathan Gladwell from Chiltern.

"People struggling with their finances need to readjust their spending to more realistic levels and be open to alternative options, like informal arrangements. Options like debt management can offer a valuable short-term solution whilst debts are brought under control, and they ensure that debts are prioritised so mortgage or rent and utility bills are accounted for first."

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