"Giving the right advice, first time, every time"


Dealing with the Christmas credit hangover


23 December 2015: During the Christmas period, many individuals are faced with very specific pressures to incur credit, without necessarily considering the long term effects of doing so.  An unplanned increase in debt can have a devastating effect on the ability to maintain monthly repayments to creditors, causing a difficult start to the New Year.

The best way to avoid the credit hangover is simply to only spend what you have.  However, the increasing pressures to spend money at Christmas, even if you don’t have it, can be overwhelming and the resulting temptation to fund gifts by extending credit facilities often proves irresistible.  If spending is unavoidable at this time of year, as it often is, then at least make your list and check it twice.  By listing what you need to buy and setting a budget for yourself, you will be less likely to overspend.

If you know you are going to turn to credit to fund your festive purchases, make sure you understand how much you are borrowing and the total cost of that borrowing.  It is also important that you factor in your increased monthly debt repayments to make sure you can actually afford the repayments going forward, before committing to that Christmas debt.

The Insolvency Service recently released its quarterly statistics which showed that whilst personal insolvencies were down by 18.5% compared to the same quarter the previous year, the total individual insolvencies in the third quarter of 2015 increased by 2.8% compared to the previous quarter. These figures are a clear indication that personal insolvency levels are on the rise again.

The negative press received by the payday loan industry over the last couple of years, in respect of sky high interest rates and dubious business practices, may well have led to fewer applications to payday lenders. However, mainstream lenders continue to lend, with high street banks offering low or no interest credit cards for ever longer periods of time, but there are indicators that this could change in the future.

Whilst the personal debt levels are nowhere near the levels witnessed in 2008 and 2009, they are increasing.  Borrowers have been given some breathing space in recent years whilst interest rates have been at historically low levels, but the Bank of England has recently indicated that interest rates are going to rise again, if only fractionally at first, over the next year or two.  This could mean that debt will be more expensive to repay, which could potentially tip precariously balancing finances over the edge.

It is always advisable to deal with financial problems before they become unmanageable.  If ignored, debt problems can quickly spiral out of control.  If you find yourself in a difficult financial position this New Year, the management team at BRI can talk you through a variety of options available to deal with personal debt problems.

‘Tis the season to be jolly – but don’t get carried away.