According to a report commissioned by One Advice, nearly 2000 people in the UK have unsecured debts in excess of £10,000. About half a million have unsecured debt higher than £20,000. People in the lower middle-aged bracket (35 to 44-year-olds) were the most likely to have substantial debts that weren?t secured, with some 650,000 individuals in that demographic owing more than five figure sums.

Similarly, for 18 to 24-year-olds there are about 200,000 people in the UK who owe more than £10,000, which is one in every twenty in that age range. Most of the unsecured debt takes the form of credit card bills, overdrafts and even sums owed to friends and family. In fact slightly less than one million people are thought to owe more than £10,000 due to personal loans, while about 350,000 have accumulated similar debts on credit cards.

Over 80,000 had an overdraft of £10,000 or more. The problem with unsecured loans is that because they are not guaranteed against an asset, they tend to be more expensive and have a higher interest rate than secured loans of the same amount. One Advice said that this left many people in a vicious, debt circle; struggling to pay off the interest alone, and unable to pay off the capital on the loan.

During 2005, some 70,000 people were declared insolvent, due to bad debts, most of whom went on to be declared bankrupt. It should be pointed out, that there is in the UK an alternative to the stigma of bankruptcy, known as an individual voluntary arrangement or IVA, where people can negotiate a reduced payment with their creditors leaving them debt-free after a period typically lasting five years. Debt consolidation is also an option for some people, and individuals should seek professional debt advice.

For anyone struggling to repay their debts and are looking for advice online, have a look at the Myvesta FAQ for details of the differences between debt consolidation, bankruptcy and an IVA agreement.

http://www.myvesta.org.uk