Reliance on debt – the seven-year glitch

November 2014 saw the citizens of the UK run up the highest amount of debt since 2007. Running up to the festive season, Britons managed to collectively borrow 1.25 billion pounds in total. This debt in mostly personal unsecured debt in the form of overdrafts, credit cards, loans, short-term high-interest loans, store cards and payday loans. The two major debt charities in the UK, National Debtline and StepChange find the trend for people to rely so heavily on credit worrying and expect an influx of people needing help as soon as the first payments on loans are called in this year.

Credit is much easier to get your hands on this year. In comparison to the leaner times like 2009 and 2010 when you couldn’t find a financial institution to lend you anything to save your life, banks and credit card providers are actually jostling to sign you up. R3, the trade body for people working in the insolvency sector, did research that shows that one-fourth of the adults in Britain was planning on taking out credit to help pay for the festive season. Out of that number 50 percent were planning to use a credit card that they already had, 24 percent were planning to apply for an overdraft on their bank account and 14 percent were planning to use store cards to finance their purchases. Other popular sources of credit are payday loans, applying for new credit cards, and borrowing from family.

Banks have changed their tune dramatically and are actually vying to sign up new clients or steal them from the competition. The focus is on getting people to move their debt from one bank to another, and the banks achieve this by taking on the customer with his debt as well as offering him increasingly long interest-free periods in order to secure his patronage. Halifax and Lloyds Bank just launched a campaign offering 0 percent interest for 34 months to clients who switched to them. Barclaycard was already offering 35 months at 0 percent before Christmas.

Personal loans have also come back into fashion it seems. Five years ago it was a miracle if you could find a bank to grant you one, and if you managed to, you probably had your house, your car, your kids and the cat up as surety. Interest rates were astronomical. Two years ago the interest rate on a personal loan was 7 percent. Today you can actually find a bank that is eager to give you a loan, and one at 3.9 percent to boot.

Andrew Hagger from the website Moneycomms said that he expects to see more offers coming out of the financial sector.

“January and February is always a period of consolidation, with people sitting down and sorting out their finances. I’m sure we will see some more banks cutting loan rates and offering new deals.”