Relying Too Much On Credit Can 'Deepen Debt Difficulties'

By over-relying on borrowed money, consumers could well find their debt difficulties increasing, an industry expert has claimed.

Speaking on BBC One's Lunchtime News programme, Peter Tutton, spokesperson for Citizens Advice, warned of the dangers of consistently funding essential purchases by taking out credit such as personal loans or going into overdrafts. He suggested that by consistently looking to borrow money to see them through periods of financial difficulties, consumers could well see problems in handling their debts rising dramatically.

Mr Tutton said: "People generally can afford credit when they take it out, but something can happen as time goes on. That can be quite a small thing like getting a bigger gas bill than you expected and it puts your finances out. Unfortunately often what happens is once people start to struggle they try and do their best but often try and manage that by using more credit and it can go up and up and up."

The representative's comments come after a rise in those struggling to manage their money has been witnessed throughout the country. In the 12 months leading up to March 2007, the Lincoln branch of Citizens Advice dealt with some 3,673 issues concerning debt - with such worries now making up a third of all enquiries the office receives.

Bureau manager Roy Trotter told the Lincolnshire Echo: "We've had a load of debt-related enquiries and it is now our main issue behind benefit and employment enquiries. So far in the first five months of this financial year we have dealt with 1,595 debt-related enquiries, the projected figure for the year is an increase to 3,828."

He added that a rising number of people have multiple debt difficulties, with money potentially being owed via a number of avenues such as credit cards, loans and overdrafts. In addition he claimed that there is a general "inability" on the part of consumers in being able to handle their debts and prioritise their outgoings. Mr Trotter also intimated that seeking help from a professional advisory service was a more effective way of getting to grips with debt difficulties than "going to loan sharks".

Meanwhile, the Derby Citizens Advice and Law Centre has dealt with more than 3,500 financial advice cases, as residents in the city cope with some 4.5 million pounds of debt incurred via loans and other means. Sally Johnson, service delivery manager at the centre, said: "Banks and credit card companies are making money out of clients and the problem will probably never go away."

Consequently those concerned that they are becoming unable to cope with demands on their outgoings could be well advised to consider taking out debt consolidation loans. Last month, research carried out by MoneyExpert revealed that 2.48 million consumers are "very concerned" about how much money they owe. Although 65 per cent of borrowers have either not deepened the amount of borrowing or cut the level of money owed, possibly through a debt consolidation loan, the study also showed that 25 per cent of people already in debt have gone further into the red over the last three months. Chief executive Sean Gardner claimed that as the nation's financial difficulties steadily increase anyone who does not take steps to reduce their debts "is heading for serious trouble".