Don’t look upon insolvency or equity as an excuse to get into debt
May 26, 2008
A recent report from the Personal Finance Research Centre has suggested that many people in the UK may be looking upon equity or insolvency opportunities as an excuse to get into high levels of debt, as they think that they can easily get themselves out of financial problems by bailing out using either the equity from their homes or through declaring themselves insolvent.
Industry officials have stated that many people now rely on borrowing for their day to day expenditure, and are less bothered about getting into high levels of debt because they think they will easily be able to get themselves out of bother through insolvency or by relying on equity in the home. Experts state that many consumers now fail to differentiate between needing something and wanting something, and many use finance to purchase unnecessary luxuries.
One industry official said that attitudes towards borrowing had changed significantly over recent years, stating: “Credit is not only freely available but considered a way of financing lifestyles rather than reflecting need. A seismic change in mindset is required to begin to unwind the chronic debt issues we face in the UK. Pinning your hopes on housing equity or thinking that insolvency is the easy way out of debt is financial suicide.”
Many younger people look upon consolidation or insolvency as a way out of debt, whereas many homeowners rely on equity. However, one official stated that those with homes were at even more risk of serious debt problems, stating: “It’s time to put an end to the old shibboleth that buying a house is always good for you. A large proportion of the people who turn to us for help are those who have taken out mortgages which they cannot afford, leaving them highly vulnerable to interest rate volatility.”
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