The Popularity Growth of Loans
The borrowing public eagerly greeted these siren calls and embraced the idea of loans and debts with great enthusiasm. Buy now, pay later became an opportunity to improve ones lifestyle at low cost, and the temptation was overwhelming.
Now however the pigeons are coming home to roost and the problems for the 'over consuming' society are becoming only too obvious. The number of Individual Voluntary Arrangements (IVAs), which are the modernised equivalent of Bankruptcy orders, increased by 150% in the second quarter of 2006. Despite this the number of 100% or higher mortgages being taken out continues to rise, so there is a section of the population who are determined to live by credit and hope for the best.
They may well be proved to be right if the recent history of house prices is continued. If however there is a fall in house prices, those who have taken this gamble will find themselves in a negative equity situation, and if a house sale should be necessary, they will have a serious debt for which to find funds and a more than even chance of losing their home. Needless to say, where a 120% or higher mortgage has been taken out, as is being done to enable payment of stamp duty and equipping and furnishing of the new home without savings, the inherent debt problems may necessitate some very drastic action.
In the end analysis there is just one straightforward rule to go by - try to avoid extending your use of credit beyond what you can afford. If the worst happens, and redundancy or serious illness cannot be forecast, you need to be able to resolve the situation without recourse to extreme solutions. It will be no use blaming the banks or other lenders - the choice is yours when considering loan offers, and the repayments are your responsibility. It is up to you to ensure that you are staying within sensible limits.
There are people such as Citizens Advice who can help you if you do hit problems, but the trauma will be considerably less if in the first place you avoid credit which you cannot afford.