For those homes with any form of unsecured lending the average debt amount is now £18,159. If the amount of any mortgage is included that value rises to £108,972.

That means that the average debt for a household with loans and a mortgage is now more than 4 times annual average income. Banks are feeling the pinch too with them writing off around £23.35m every day in bad debts.

Whilst some are seeing the green shoots of recovery many experts are still unsure as to the future of the economy and with the recent round of public spending and benefit cuts, many will find their incomes stressed even further. So what can be done if you are feeling the pinch in these tough times?

All households must have a serious review of their finances and develop a budget by which to manage expenditure. By analysing where your money goes each month you can quickly identify areas where money can be saved in the short term. Items to prioritise are the mortgage or rent, council tax and utility bills. These will keep the roof over your head. Cut out any unnecessary spending on luxury items such as health club memberships and move to a cheaper supermarket for the weekly shop. And take a list with you and only buy what is written down! Impulse spending can be a challenge so take cash and leave the credit and debut cards at home. You can't spend what you do not have.

If you have any equity in your home you may want to consider raising a secured loan to pay off all your short term store card debt. This will save money in the medium term as long as you put the cards away and pay off any spend each month in full!

There are numerous companies that now offer debt management plans and advice to help you get back in control of your finances. Independent advice from an organisation such as the Citizens Advice Bureau (CAB) will help point you in the right direction if you are unsure of what to do. Debt management plans range from informal arrangements to reduce your payments with lenders through to more formal Individual Voluntary Arrangements (IVA`s) that are approved by the court. IVA`s are now a recognised way for those with debts over £15,000 to get back in control over a 5 year period. Some of the loan balance may be written off at the end of the term if you keep to the plan agreed.

There has been a great deal of hype recently about unenforceable contracts [1]. These are loan agreements where the terms and conditions or the way they were sold or signed up were flawed and allow them to be cancelled as unenforceable by a court. This is a long shot hope and do not spend money finding out if your contracts may be unenforceable. Take advice from an organisation like the CAB rather than waste money with another organisation.


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