- 13
- Mar
Reports from a third of UK banks and seventy five percent of buildings societies indicate that 2007 will see an increase in the number of bad debts in the UK during the first three months. This is according to statements from PricewaterhouseCoopers (PWC). This will be the sixth consecutive financial quarters where bad debt levels increased.
PWC’s spokesman stated: “We know there has been a problem with bad loans rising in 2006 and… one third of banks are still saying they think it will keep rising because of the level of personal insolvencies.” He also added: “Traditionally the main reason for people defaulting on loans is divorce or unemployment but this time people are unable to pay their debts because they have simply borrowed too much.”
He added that that banks and financial institutions in the UK have major concerns over the levels of bad debt, and that the wrong type of consumer is being given an IVA arrangement defeating the purpose, and putting the consumer in a no-win situation.
Analysts estimate that thirty thousand UK consumers may become insolvent in the first quarter of 2007.
Consumers who should be looking toward a debt consolidation loan, or a bad credit loan from a bank, are being encouraged to take out an IVA, even though the company has reasonable doubt over their ability to make repayments.
Bad credit loans have higher interest rates based on the consumer’s credit rating. This makes it easier for IVA firms to convince consumers that bad credit loans are not a viable option for them, when, in fact, the bad credit loan is a more financially responsible choice.
