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Bad debts hit record levels for banks

2006 saw the highest level of consumer bad debts for banks on record, according to figures released from KPMG. The figures indicate that for the first time the one hundred thousand barrier has been broken in terms of the number of people becoming insolvent in the year, with around one hundred and ten thousand people going for insolvency through Individual Voluntary Arrangements (IVAs) and bankruptcy.

According to further data, UK banks saw bad debts rise to a whopping sum of nearly one and a half billion pounds in 2006. This is partly thought to be due to the massive level of consumer debt that many households and individuals have got themselves into over recent years, with many struggling to keep up with repayments on credit cards, loans, and other forms of unsecured finance. It is also thought to be partly due to the massive advertising campaigns that have been seen over the past couple of years, with many companies offering to make it easy for consumers to get out of debt quickly through IVAs and debt management plans.

The number of people opting for an IVA increased by one hundred percent from 2005, with around forty five thousand people opting to take this route. An IVA involves coming to a repayment arrangement with the creditors and repaying part of the debt that you owe, with the remainder being written off after sixty months.

One KPMG spokesperson stated: 'Typically the sorts of debts we have seen being dealt with by with IVAs in 2006 are personal loans, credit card balances and other forms of 'buy now, pay later' unsecured loans. Most of the money is borrowed to meet current expenditure - including lifestyle items such as holidays - rather than to acquire assets or to fund a business.'

Alisdair Milton
2nd January 2007


More Information:

  • What is Different about Bad Credit Loans?
    These days, banks offer a range of products and services designed to meet the needs and wants of all their customers. Many branches will have a different advisors and customer relations managers who are assigned to the different customers of the bank.
  • Factors that make you a Bad Credit Applicant
    We all like to think of ourselves as fairly responsible and trustworthy people, especially when it comes to financial commitments. But the fact of the matter is that some people are more reliable and responsible than others and banks and other lenders know this.
  • Loans for Those with Poor Credit
    Is it possible to obtain a loan if you have a poor credit score or even if you've declared bankruptcy? The answer is yes. However, not surprisingly, the loans available will have higher interest rates and restrictions that are more stringent.
  • General Loan Advice For Managing Debt
    Debt is a really easy thing to get stuck in. Even if you are not extravagant monthly costs can spiral out of control, especially if you take your eye off the ball. So what can you do to avoid getting too far into debt and if you are there already how can you get out of it?


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