FinanceDaily – 70 Days of Salary to Clear Debt Interest Alone

FinanceDaily – 70 Days of Salary to Clear Debt Interest Alone

With personal loan debt almost four times higher than last year, even our combined January and February earnings are not enough to pay off the interest on our debt – without actually even reducing it, new figures reveal.

As a nation, we have worked the last 70 days solid to earn enough money just to service the interest on our credit card and loan debt, let alone re-paying the actual debt itself, according to new figures from Unbiased.co.uk.

The site has hailed today, Monday 10th March, as Debt Freedom Day. This is a stark increase from last year, when Debt Freedom Day was the 1st February 2007, meaning we only spent 31 days to service our debts.

The figures show that personal loan levels in the UK increased to £9.8 billion, from £2.6 billion last year. At the same time average interest rates on personal loans are now 0.5% higher, which means that Brits pay almost £1.5 billion in interest payments alone. Credit card debt in contrast has dropped slightly, decreasing from £55.6 billion to £54.9 billion.

Personal debt levels in general have increased by over 10% over the last year and average levels of interest payable on this debt has increased by over 6% – making the proportion of income needed to service this financial burden even greater.

“This year’s Debt Freedom Day is a real warning for UK consumers – as it marks the day we start paying off the actual debt levels rather than merely servicing the interest accrued,” said David Elms, Chief Executive of Unbiased.co.uk. “Compared to last year we spend almost two months longer this year to pay off the interest of our borrowings and this doesn’t event take into account mortgage costs.”

He added that although Debt Freedom Day is a hypothetical point in the financial calendar, people should still pay attention to it, as in the current economic climate is has never been more important to realise just how much it costs to service debts and to ensure there are adequate funds available to do so.

“Seeking independent financial advice can be the first step to taking control of your finances,” he added. “An independent financial adviser can assess your financial situation and help you identify where your monthly budgeting could be improved and help you embark on the path to saving.”