According to the latest Bank of England data, net new issuance of commercial paper and bonds stood at £17.5 billion in November 2017. This statistic shows that November 2017 was the busiest month for UK businesses and banks since October 2009.
Debt markets have been growing at the fastest rate in eight years, and what’s more, bankers expect the trend to continue in 2018. From January to November 2017, UK businesses and banks raised a net £50 billion which was the yearly level since September 2010.
According to Davis Marks, a debt capital banker at JPMorgan, UK banks are expected to be more active in capital markets this year (2018) than they were in 2017. UK banks must, however, refinance existing debt as well as build additional capital to meet the 2022 regulatory requirement deadline.
Labour analysts have been on record warning over rising household debt. According to John McDonnell, the level of unsecured borrowing in Britain may hit record levels very soon. According to remarks he made in December 2017, McDonnell stresses a need for more decisive action from the government in 2018 regarding debt since the UK has already seen a debt crisis with payday loans where payday loan companies were making astronomical profits from people’s financial problems.
Analysts have predicted that the level of unsecured loans per household in the UK will exceed £15,000 in 2018 and could easily surpass £19,000 by 2022 if adequate action isn’t taken.
Million of Britons starting 2018 in debt
The latest National Debtline statistics indicate that 7.9 million Britons are likely to start 2018 with debt accumulated during the Christmas season. The debt advice charity estimates a record 16% of Britons will face difficulties meeting their financial obligations in January 2018 compared to 11% last year. This statistics clearly shows that people will be worse off this year than last year, but all is not lost.
The FCA has new rules in place that require UK lenders to prompt borrowers to repay debt faster. Lenders are also obligated to intervene early in cases of repayment difficulties. For instance, they can cancel interest and/or waive charges accumulated on short-term debt like credit card loans for customers who are in debt persistently.
Quick measures/steps to get out of debt in 2018
In case you are already in debt in January 2018, there are some measures you can take by yourself to repay the debt before more is done by the government and regulators to deal with the increasing rate of household debt. It doesn’t really matter if you took out a short term loan such as a payday loan that you didn’t need. It’s time to take action.
Step 1: List all your debt
If you have more than one loan to repay, you should start by listing all your debt. It may appear obvious; however, most people who take many short-term loans don’t know how many loans they service in a month among other important details such as interest amount and additional fees. A simple exercise such as listing current loans can help you assess affordability accurately preventing you from taking up more loans.
Step 2: Repay the most costly loans first
Step 1 should help you identify expensive debt. Repay such debt first to reduce the total time you take repaying especially if you make more than minimum repayments. Observing this step will also help you reduce the total charges incurred.
Step 3: Halt savings/investments for a while
It’s always prudent to save and invest after getting rid of debt especially if it is short-term debt which accumulates hefty charges in fees and interest. Instead of saving and investing every month, as usual, use the money to offset your debt. However, don’t forget to continue saving/investing once you are debt-free.
Step 4: Consider debt management strategies
If you accumulated a lot of debt during the festive season that may not be repayable easily/faster/comfortably using your monthly savings, you can consider consolidating the debt which is simply; combining many debts into one manageable debt. Many lenders offer this option. You can also visit a financial professional to advise you accordingly given debt consolidation has some risks that must be understood beforehand to avoid more debt problems.
Lastly, don’t get into debt again. If you must take a payday loan or any other type of short term loan, use the loan amount for the intended purposes. Loans should never be misused. Never take loans simply because they are available. You should also take a loan you can afford comfortably.
Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.