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 Monday, 13 January, 2003, 06:30 GMT
How I kicked the debt habit
A woman's outline with a pile of bills
Britain has seen a credit explosion in the past 10 years

BBC News Online talks to Sarah, a victim of credit cards and loans for 15 years, as part of a week-long series on personal debt.
Sarah from Tyne & Wear lived with debt for more than 15 years.

Things started to go seriously wrong for her when her husband gave up work due to ill health in 1985.

One of the worst things was having to say no to my kids at Christmas

"It was a struggle but we were coping, then I fell pregnant and had to give up work for a while."

When Sarah turned to credit cards and loans to cover her existing borrowing, the slide into serious debt difficulties began.

Open in new window : Debt ridden Britain
How much do we owe?

"I was robbing Peter to pay Paul," she admits.

Christmas woe

Later, Sarah was able to start her own small business and pay off some of her previous debt.

However, she was unaware that her husband was meanwhile siphoning off funds from the company and applying for new credit cards.

Christmas presents
Sarah found it most difficult at Christmas time
Inevitably, the business folded, and Sarah was devastated to discover that her husband had been taking out the credit cards in her name.

In short, when she finally asked her husband to leave in 1996, Sarah was left with debts of £13,500 and an annual income of just £8,500 a year from an office job.

"I did not know where to turn," she said.

"One of the worst things was having to say no to my kids at Christmas. However, it brought us closer together in the end."

Debt management trap

Unaware that there was free advice available from charities such as the Consumer Credit Counselling Service or Citizens Advice, Sarah tried a debt management firm.

People in debt feel a terrible stigma, it is heartbreaking

These companies promise to act as go-betweens between clients and their creditors.

"They gave me a budget which was helpful but they charged a fee and that money could and should have been used to pay off my debt."

Sarah has now got back on her feet after seeking advice from a leading debt charity.

In 2002 she became a homeowner and is now able to provide for her two children aged 16 and 11.


Ironically, Sarah now counsels other people with debts.

"It is good to help out - the problem is that people in debt feel a terrible stigma, it is heartbreaking.

"Recently, I saw one 27 year old woman [who was] £40,000 in the red with no prospect of paying it back.

"I was the first person she had been able to speak to and she was very tearful indeed."

Debt race away

Although it has a happy ending Sarah's debt spiral story is far from unusual.

Britons have spent the last decade piling up a debt mountain.

House-price falls will leave people feeling more exposed as far as their debts are concerned

Jonathan Loynes
Capital Economics
Although incomes are increasing, total debt as a percentage of average annual income has increased from 54% in 1993 to 70% in 2002.

Sarah says irresponsible lending is at the root of the UK debt explosion.

"Lenders do not look at the overall financial position of people - asking can this person really afford more credit?

"Instead all they look at is if a person has kept to repayment plans in the past."

House prices

Many economists say that borrowing in the UK has been made easier by low interest rates, near full employment and personal income outstripping inflation.

A man looking in an estate agent's window
The housing boom has fuelled Britain's credit lust
In addition, house-price rises mean that many people's major asset - which they can borrow against - has been growing in value during recent years.

Since 1988 debt has increased on average by 112% while house prices have gone up by 141%, according to a recent survey by the online bank Egg.

But with the economy slowing and the property market - at least in London - running out of steam, many borrowers may be feeling under pressure.

'Belt tightening'

Jonathan Loynes, chief economist at Capital Economics, told BBC News Online that he expected house prices to fall 20% during 2004, leaving consumers with a bad-debt hangover.

"House-price falls will leave people feeling more exposed as far as their debts are concerned. We will see a general belt tightening as people try to bring their debts under control."

In the past, rising inflation eroded the value of personal debts, making them more manageable.

However, with inflation now so low, at about 2%, it will take much longer for the debt to shrink in real terms.

As a result, many people could struggle, like Sarah, to get on top of their debts.

Your comments

Mum was a single parent bringing up three children and she managed to avoid such debt (without any state benefits I might add). Obviously being made redundant is not something people can control, but there are such things as payment protection insurance which covers repayments in this eventuality. If people are stupid enough to rack up so much debt with no means of paying it off then it's their own fault. There is no such thing as free money, and the sooner our money-crazy spending happy society realises this the better.

It is the relentless pressure of modern society, especially at times like Christmas, that persuades people to get into debt. The endless offers of credit by finance companies and the pressure to have the latest fashions and products. I was a single parent for 10 years and never gave in to it, as a result I am now debt free with my own house and am about to set up my own business. The future is rosy and I'll never be tempted to give in and buy things I don't need and can't afford. I've seen too many friends go under, go bankrupt and sacrifice their futures - for what?
Louisa Morgan, UK

The single biggest problem behind this country's debt-sustained economy is not just irresponsible lending and lack of consulation for each potential borrower - it's the advertising methods used to hook people in the first place. Many satellite TV channels run back to back loan adverts every 15 minutes (it's like brainwashing), and all are either of the "Why wait for a new car/holiday/home improvement" variety or, ironically, the "Are you worried about debt - then take out a consolidation loan" type. The sooner these companies stop shoving loans down the throats of those who can't really afford it the better; and these adverts are preying on the hopes and dreams (and fears) of the nation -advertising standards should introduce rules for lenders.
chris, UK

I was in debt to the tune of £9,000 at the age of 19 as a result of living with a boyfriend for a year. He didn't help to pay any of the bills so I had to, to make sure we had electricity, water and food. I left when the lease ended and went back home to my parents for a year during which I paid the whole lot back. It was miserable, I didn't go out or buy myself anything which wasn't neccessary, so my only outgoings were food and rent. I didn't tell my parents or friends about the debt because I was ashamed. I lost 3 stones in weight and became a daily user of my local library as it was the only thing I could do for free! I certainly learnt my lesson as 10 years on am I'm still debt free. I still have credit cards but I pay the entire amount off every month. I don't blame the credit card companies, I was the one that spent the money, I'm just glad it was there for the taking as it made a hellish year much more bearable. Just remember, there is always light at the end of the ! tu! nnel, even if you can't see it yet. Work out a budget and stick to it, write every little thing down that you spend money on, it really helps to see where you can make cutbacks, and don't give up. Don't take out loans to repay other debt and try to reduce your credit cards to just one that has a very low APR. It may take one year, or five, and it will be hard, but you can do it and the quality of life you gain is absolutely worth it.
Carrie, UK

I left University over two and a half years ago having taken out my full quota of student loans. During that time I have been working full time for a company in the city, I have yet to pay off that particualer debt and, thanks to the cost of living in London (rent, bills, food, transport costs) find that I now owe for a further two graduate loans (£6000) and two credit cards (£6000). I am not a big spender, I work pretty hard and yet I still seem to be permanantly in debt - I cannot pursue the career I want until I'm solvent - so am stuck in a job I do not enjoy. It is like dragging around a huge ball and chain. The banks just threw money at me after University -which was great at the time but I rue the day I ever signed on the line of my first graduate loan.
Charlie, UK

When I got my first job after leaving university, I got a credit card, and ran up a debt of £3000. Things went from bad to worse and I'm now £5000 in debt. I too tried a debt management firm, but then found payplan, a company owned by A & L, who don't charge a fee. It will take me a while to pay it off. In the meantime, I suffer from depression due to continuing phone calls from creditors.
Darryl, England, UK

I have run up £60,000 on credit cards and, quite frankly, I'm terrified. I have a decent paid job in London, but have no idea how I am going to pay it all back.
Ranzar, UK

With all respect to Sarah, the root cause of the UK debt explosion is NOT irresponsible lending (indeed if such a thing was rife all lenders would quickly go out of business). Individuals who borrow HAVE to take responsibility for their own choices - I'm afraid the responsibility lies solely with them.....
Nigel, UK

I absolutely agree with Sarah that irresponsible lending is the key to suffering, most notably by the big mortgage providers who have been the main drivers in this debt explosion both directly and indirectly. The so-called "economists" employed by these companies will be exposed by the dramatic house price correction as at best ridiculously optimistic and at worst negligent in their forecast of house price growth, in the same way as stock analysts are now pilloried ruthless pawns of the investment banks. The unforgiveable greed and arrogance of these institutions has left a legacy of suffering for normal people seduced by their flawed research. So much for the abolition of boom and bust!
James, UK

I was one of the naive millions who was promised a better life by going through University and completing my studies. As the government refused to pay for one year I ended up turning to a bank to acquire a loan to complete my studies. At the end of the studies, I spent almost 2 years searching for jobs and filling out 100s of applications forms. I'm now on a minimal salary job fighting to keep afloat with £15k of bank debts and approx £10k of student loans, despite the fact that my spending is VERY tight and not having credit cards. Mortgages? Well I don't think I would be able to saddle myself with another debt for some time! And I see peers who never studied in HE, and earn a lot more than I do, without the complication of debts.
Dan A, UK

When will people realise that in many cases it's all about personal choice. You choose to spend the money and therefore it's up to you to pay it back. It's the same as the overweight people sueing McDonalds, why do people have to have someone else to blame? Nobody forces them to take the money, you can always say no. If you can't then your own weakness leads you into debt. Don't blame the lenders, blame the borrowers!
OJ, England

I agree that getting credit is all too easy, however I strongly believe that anyone borrowing heavily beyond their means must take responsibilty for their actions. Surely in many cases, it is pure greed and stupidity? Advice: keep away from the high street stores and the pub until debts are paid!
Andrew, UK

I was £7,000 in debt at twenty after having credit cards and loans thrown at me by banks, although I don't blame them, they are there to make profits. After selling a house I managed to pay of some of the debts but still have around three thousand pounds owing three years later. I am now in the lucky position that I live with my parents rent free which has allowed me to pay off alot more than I could have any other way. I did try a debt management firm at one point, but instead of helping I ended up with a CCJ and most of my debts with debt collection agencies. Currently I have a very bad credit rating and will do for a few years now, which I am quite happy about as it will stop me starting the spiral all over again. It is all to do with willpower, I didn't have any when I was younger, hopefully now I have! and won't end up in that mess again.
Michelle, UK

I have been in debt now ever since I started work when I was 17, over 10 years now. All thanks to my parent persuading me to get finance on a car I didn¿t even really want. I have never been able to get on top of my debts as one debt creates another debt. You are always short of money while just trying to make ends meet. The problem has got so bad I have even considered giving up work as I have hardly seen anything of my wages for all my working life. The solution is simple, just live out of your pocket from the start. If you haven't got the cash, then you can't buy. You will be far richer in the end....
Charlie Sweetman, London, UK

I have just made my last repayment on my final loan. At one point I reached over £21,000 worth of debt, the majority of which I built up during my university years. The best advice I can offer is to consolidate all your debts and shop about for the best deal on a loan - it worked for me.
James, UK

Many people these days expect to be able to live out a certain lifestyle (as seen on TV) regardless of whether or not they can afford it. Credit cards, personal loans and automatic bank overdrafts offer a huge temptation to live now and pay later. Many years ago I borrowed money to buy a car. The loan was reasonable but close to the time of the final payment I received an offer of a further loan. It was tempting to receive another few thousand pounds and continue with similar monthly payments. The trouble with this sort of "sustainable debt" is that any further demands on my funds maight cause me to slip into serious debt. I can't believe how sneaky and predatory some TV adverts are when they target those in debt. I saw one recently where a woman meets a friend in a supermarket car park loading heaps of shopping into a brand new car. Her friend explains that she has "consolidated her debts into one easy single payment" and now has enough over to splash out on a car! Basically she has borrowed enough money to pay off her debts. That idea used to be a joke!
Andy Kelly, UK

With little or no parental or other support, many students will have to turn to loans to support their education. Then after their course, they may need to take a graduate loan to actually move to a new job, buy decent clothes etc. A graduate's first job is probably not going to be highly paid, and therefore a signficant impact on reducing the loans borrowed isn't going to occur for some time. This is exactly the path I took, and of course I wish I didn't take the loans, but to survive I had no choice. To get a good future through education, it was necessary to become in debt. Luckily, buying a flat (100% mortgage funnily enough) and its increasing value has given me some relief as there is capital tied up in it that can pay off those loans if I choose to.
ben, UK

It's sad and difficult for people when things go wrong and you have to provide for your family, but I think that a lot of debt is also people who simply want things they can't have. Blaming the lenders in this case is wrong.
John Ladd, UK

Personally, I don't borrow anymore, simply because I got sick of paying £25 for bank computer generated letters. It simply shouldn't be allowed for financial institutions to kick people with these letter charges when borrowers are already down in the gutter. I should add that I now view credit card companies as parasites and treat there invitations of credit with the utmost contempt.
jon, uk

Know just how she feels. I am in debt and hate it but with bills increasing every year but my salary staying the same it is impossible not to go into debt. I just wish I could go out at least once a month to the pub for just one drink but its not an option, unfortunately mortgage, home insurance, council tax etc. come first. People in jobs who earn more than the minimum wage and receive an annual increase no matter how small do not know how lucky they are.
Sarah, UK

I've £4,000 debts solely due to the lack of temp work since autumn 2001, my income being half what it was then. I pay out £70 a month to cover insurance and interest, but it never comes down. I have always lived on a shoestring although regret the lack of recent holidays. I now have a business to develop with no money to invest or credit leeway to draw on. In one way it is terrifying but here is where necessity really does become the mother of invention. I will make my products at home, work part-time to pull in the rent and tackle these debts radically this year as they are bedevilling every aspect of my life.
Joan, UK

I think a lot of the problem is with the mindset of people - I have a friend who got a credit card with a £10,000 credit limit and saw it as him having £10,000 in his pocket to spend!! I myself have credit/store cards but never run up huge bills and pay what I owe at the end of each month - I resent paying interest. If I can't afford it I don't buy it - simple!
Melanie, UK

I don't agree with Nigel. I earn £40k a year and have a secure job. I have one car loan and I pay all my credit cards in full each month. The reason I disagree with Nigel is because one credit card company has just sent me a guaranteed loan offer of £20k (half my annual salary) and another credit card company has also sent me a guaranteed loan offer of £9k, just before Christmas. I work for a bank and am very sensible with money, but these kind of guaranteed offers are bordering insanity and of course they are going to encourage some people to over stretch themselves. I think the problem is down to both the customer who over commits and the bank that over lends. Anyway there is some good news on the horizon as Experian the main credit checking company in the UK is launching an indiviudal indebt index on every person in the UK so banks will be able to tell in an instant if a customer is over-stretched.
John, UK

I moved into a new property. My first house so I was quite naive and so didnt do the things I should have done like get my boiler serviced. Next thing I had a six month gas bill of over a thousand pounds. There was no way I could afford to pay it and British Gas were less than helpfull. Next Welsh water wanted a years water up front. Before I knew it I couldnt even afford food. I had overdrafts and credit cards piling up until at 19 years of age I had almost 4 grand of debt with all the charges. I finally got a loan to consolodate and Im on my way to paying it off. What I learnt was that some companies are understanding until you can not pay their bills.
Ian, Wales

As a family of four, we've found our debts mounting since the children were born.We have a loan and credit cards which we are paying off at the moment. I think credit companies are partly to blame for agressive advertising that promises your dream consumer goods/car etc-you can have it now,why wait. However I agree that the responsibility lies with the credit user to think before "splashing the cash".
Carl,U.K, UK

Do you have a similar story to tell? How have you coped with the stigma of debt? Are Britons heading for a debt disaster?

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BBC News Online is running a week-long series on dealing with personal debt

Debt busting



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28 Nov 02 | Business
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