Debt Management Essential as Recession Approaches
Following Bank of England Governor Mervyn King’s announcement that the British economy is entering a recession, debt management company Gregory Pennington have warned that financial hardship is likely to be widespread in the coming months, adding that the public should aim to get their finances in order and tackle any debts as a matter of priority.
Speaking at a business conference on Tuesday, Mervyn King told business leaders that the economy faces a “sharp and prolonged slowdown”, perpetuated by smaller take-home salaries, soaring living costs and limited access to consumer credit.
“We now face a long, slow haul to restore lending to the real economy, and hence growth of our economy, to more normal conditions,” he also said.
On a more positive note, King said that some of the factors causing inflation had “shifted decisively”, putting less pressure on the Bank of England to actively control inflation and instead giving them time to address other factors, particularly the cost of consumer lending.
A spokesperson for Gregory Pennington warned of the dangers that consumers face as a recession approaches. “One of the biggest dangers is unemployment. Since there will be less money flowing through the economy, businesses will suffer, and many will be forced to make job cuts as a result – which restarts the same cycle.
“If borrowers miss payments, the creditors may pursue the whole debts, which can lead to court action and even bankruptcy if they are unable to comply.”
The Gregory Pennington spokesperson said that there a number of debt solutions that could help people repay their debts and limit the pressure on their finances as the economy enters a recession.
“For people with multiple debts, a debt consolidation loan can help,” she said. “Debt consolidation involves taking out a new loan to cover your existing debts, meaning you only have one creditor to repay.
“For more significant debts of £15,000 or more, an IVA (Individual Voluntary Arrangement) might be more appropriate. This involves making monthly payments over a period of five years, based on how much you can afford. Once that five-year period is over, your remaining debts will be considered settled.
“Before you make any decisions, it’s important to seek independent debt advice. A debt adviser will talk you through your situation and will be able to establish which debt solution is right for you.”
