Thousands of people each year get caught in the trap of borrowing money to pay for Christmas. It's fine if you can afford it, but many people find themselves agreeing to credit deals and borrowing that is sooner or later going to pull them into a debt trap.
The following advisory note from the Office of Fair Trading serves as a useful reminder to HR and business managers that their staff could be heading for trouble.
DON'T BECOME ANOTHER DEBT STATISTIC
- take control of your spending this Christmas
Don't let credit turn into debt
The campaign warns people of the dangers of excess debt, especially at Christmas, and signposts sources of advice for those already experiencing problems.
Debt statistics show that:
- Consumer credit has increased by more than 60% in the last four years and is now running at £159 billion a year.
- The average debt per person on unsecured lending (i.e excluding mortgages) is roughly £2500.
- Citizen's Advice Bureau report a 37% increase in queries about debt in the last two years.
John Vickers, Director General of Fair Trading said:
"Debt problems can occur at any time of the year and cause misery. Christmas is a time when there are real pressures on people's budget and that is why we are launching the campaign now. All our information and advice on debt will be available year-round.
"The campaign isn't telling people not to borrow - it is saying that you should consider carefully before buying on credit.
"The campaign encourages people to think before they borrow and compare what lenders are offering. Most people will shop around for their Christmas presents to get the best deal, but how many will shop around for their credit deal? Don't automatically take the instant credit deal that the shop offers you - you may get a better deal elsewhere. And use the APR (Annual Percentage Rate of Charge) to help you find the best deal.
"Before signing on the dotted line for credit ask yourself honestly if you can afford it. It's also important for people to remember that if they do get into problems, free impartial debt advice is available."
The OFT's debt campaign has three main messages:
- Think before you take out credit - can you afford to repay the loan? How much are the repayments and how often do you have to make them?
- Shop around - many people shop around for the best price of goods, but then just settle for the credit offered by the supplier. Check out whether you can get the loan cheaper from a bank or by credit card - use the APR as a guide to which is the best deal.
- If you do get into debt, seek help - see notes for details of organisations who can help.
As part of the campaign the OFT has a free leaflet "Don't let credit turn into debt", and a budget planner plus an easy to use APR ready reckoner for comparing the different rates. Available from trading standards, Citizens' Advice Bureaux or direct from Freephone 0800 085 2223. The OFT website at http://www.oft.gov.uk also has more information about debt, including downloadable versions of the leaflet, APR ready reckoner and monthly budget planner