Partner Article

Debt freedom taking longer

People in Britain have had to work for an average of 70 days this year just to earn the money they need to pay interest on their credit card and loan debt, according to figures released yesterday. All the money the average person earns during this time goes towards servicing debt, without even reducing the amount they owe, says independent financial adviser website Unbiased.co.uk.

Unbiased heralded Monday 10 March as Debt Freedom Day, the day when the average British individual’s debt would be paid off. This is an increase from last year, when Debt Freedom Day was 1 February 2007, meaning only 31 days were spent working off debts.

This was driven by a 10% increase in personal debt levels during the past year, while the interest people are charged on their borrowings rose by 6%. The amount people owed on personal loans jumped to £9.8bn this year, compared with £2.6bn in 2007.

David Elms, Chief Executive of Unbiased.co.uk, said: “This year’s Debt Freedom Day is a real warning for UK consumers - as it marks the day we start paying off the actual debt levels rather than merely servicing the interest accrued. Compared to last year we spend almost two months longer this year to pay off the interest of our borrowings and this doesn’t event take into account mortgage costs.

“While Debt Freedom Day is of course a hypothetical point in the financial calendar, people should pay attention to it. In the current economic client is has never been more important for people to realise just how much it costs to service their debts and to ensure they have adequate funds available to do so.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .