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UK banks look set to write-off record levels of personal debt

The UK's leading banks are expected to write-off record levels of consumer debt when they report their end of year financial figures this month. Collectively, it is anticipated that Barclays, Lloyds TSB, HBOS, Royal Bank of Scotland and HSBC are to write-off over £6.5 billion in bad personal debt because of defaulting UK consumers who are unable to repay their debt.

If correct, the £6.5 billion or more UK banks look set to write-off this year in personal debt will be a 20 percent mark-up from last year's figures, which were themselves records and were 50 percent higher than the 2004 figures.

However, even though Brits are now defaulting on record levels of personal debt, UK banks also look likely to post record profits again this year – showing that credit cards, personal loans, mortgages and personal loans are still big business in the UK. Conservative estimates are that the UK's leading banks will cumulative make approximately £40 billion in profits from their credit card, personal loan and overdraft businesses alone.

In the meantime, the debt advice firm Debt Free Direct estimates that there may now be as many as 2 million household in the UK who would be classed as being "permanently indebted" – in other words, they have no hope of ever repaying their personal debt in their current circumstances.

In the meantime, a year which has also seen record levels of personal bankruptcies and IVAs in the UK has caused regulators to ask lenders in the UK to start to take more of a responsible approach to their lending practices and to tighten up their lending criteria – especially with regard to issuing credit cards on which UK consumers are failing to even meet the minimum payments of 2.5 percent of their outstanding balances. To this end, a spokesperson for Apacs, the UK’s payments association, stated that UK banks have, and will continue to, tightened their lending criteria so that it will not be so easy for UK consumers to borrow records levels of debt next year.

To many UK consumers facing mounting debt problems, the answer to their prayers of how they are ever going to get out of the debt trap they appear to be in is either in winning the lottery, getting an inheritance, or simply by walking away from their debt problems altogether by filing for personal bankruptcy.

However, UK debt advisory services warn Brits to think long and hard before choosing to file for personal bankruptcy as this will have a lasting effect on your long-term credit rating and instead to try and seek ways to consolidate your personal debt the moment you start to realize your debt problems are getting out of control.

Richard Smith
22nd February 2007


More Information:

  • 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?
  • Managing your debts
    It is easy for debt to get out of control. Student loans, losing your job, becoming ill or any number of other unforeseen events can easily cause debts to mount up.
  • Refinancing Debt
    Did you know that switching lenders can save you money? Just because you agreed to a loan in the past, doesn’t mean that you have to stick with it forever. Most people stick with the same lender for years and years.


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