Let’s talk about responsible borrowing


It’s no surprise that consumer debt is still a big issue, with personal borrowing having passed the 1trillion mark and continuing to grow.

Recent research shows a glimmer of hope for credit card spending but a worrying trend of youngsters seeing debt as acceptable. The rate of spending on credit cards once seemed to be spiralling out of control but the Association for Payment Clearing Services says credit card spenders are becoming more savvy, with spending levels slowing. And those who are spending on their cards aren’t letting their debts fester. Almost three-quarters of all spending on credit cards is paid off within a month and for those with remaining balances, around one in five have their spending on 0% interest deals.

This change has been put down to the increase in spending on debit cards. It seems people are now spending what they can afford. This is good for their future financial situation but what we mustn’t forget is that there is still a savings gap of 27bn which shows no signs of reducing. People simply don’t have savings to fall back on when disaster strikes.

Proof that people are finding it increasingly hard to cope is in the record level of bankruptcies. The number of people declared bankrupt in England and Wales increased by more than a third in the second quarter of this year. This adds up to a 3trillion protection gap and an opportunity for financial advisers to help get the protection message across.

The level of bankruptcies is more worrying now some loan companies appear to be trying to make debt seem acceptable to children. Personal finance site www.moneysavingexpert.com has launched a ‘not in front of the children’ campaign to try to stop loan companies advertising on children’s TV channels. It claims companies which offer secured loans to people with poor credit histories have been using advertising slots during children’s programmes.

A poll of the website’s users finds children remember the adverts and pester their parents to borrow money to buy them things they want. There is also concern the ads could cause future problems for children receiving these messages at an impressionable age. A petition has been drawn up to encourage children’s channels to stop allowing such advertising and it has widespread support, including among MPs.

Financial advisers are unlikely to be able to stop people taking on debt or change the ‘buy now, pay later’ culture. Their message must be about responsible borrowing. It makes sense to set a little aside each month, just in case.