Debts & Loans

People in debt should be given the advice and tools to sort out their finances themselves, according to a new report by charity.

Advice is calling on the credit industry to work with the advice sector to help people gain the skills needed to manage their debts and re-negotiate with lenders.

Nearly half (45%) of respondents to a recent survey wanted the skills to take charge of their debt management themselves. This “self-help” debt advice involves giving people the initial support they need to draw up a realistic budget. It also supplies them with the letters they need to make offers of repayment.

This move would also free up advice charities to help those who do not have the ability to negotiate with lenders themselves.

Consumer borrowing has rocketed in the last 10 years. By August this year, the level of personal debt in Britain (£1.444 trillion) outstripped the UK’s gross domestic product (£1.4 trillion), according to accountants Grant Thornton.

David Harker, chief executive of said: “Personal debt in the UK accounts for one in every three problems we are asked to help with.”

“It's important that those who want to, and are able to, can negotiate with creditors directly without the risk of being treated unfavourably.

“We are recommending that a working party consisting of representatives from the credit, debt collection and advice sector should work together to agree a set of proposals for a model of practice for ‘self-help' and implement these by 2010”.

The survey questioned 1,042 people about their experiences of managing their debts, as well as creditors and advisers. It was conducted in conjunction with Advice UK and the Institute of Money Advisers.

On behalf of the lenders, Eric Leenders, executive director of retail for the British Bankers’ Association said: “An effective ‘self-help’ model could be a good way of supporting consumers in sorting out their debt problems and taking control of their financial affairs.”

Chris Eagle, commercial manager at CreditChoices.co.uk, said: “It’s good to see the credit industry is planning to working alongside the advice sector to help those in financial difficulty.

“For anyone with debts, even if they are not in crisis, it’s important to compare deals and get the best rate on the market for overdrafts, loans and any credit card borrowing. And remember, the golden rule is always to clear your debts which carry the highest interest rates first.”