Scottish Borrowers ‘Hit Hard’ By Rising Levels Of Debt

Consumers in Scotland are increasingly struggling with debt, new figures indicate.

In research released by the Institute of Chartered Accountants of Scotland, the lowest-earning members of society - those in their early 20s and people of retirement age - are the most likely to run up unmanageable levels of debt via avenues of borrowing such as secured loans and credit cards. The news comes as findings show that the number of people filing for bankruptcy in both the under-25 and over-65 age brackets has doubled over the last two years.

In 2004-05, 79 Scottish people under the age of 25 became bankrupt - however this has now risen to 157. Meanwhile, 105 over-65s filed for this type of insolvency over the course of 2006-07, in comparison to the 46 noted two years ago. As a result it was suggested that the large rise in personal debt difficulties witnessed across the country is having a “disproportionate effect” on those people who make the least amount of money, which consequently could see them have the greatest struggles in paying back loans and other types of borrowing.

Commenting on the study, Anne Bryce, director of insolvency at the institute, said: “There are underlying reasons to explain why these vulnerable groups are being hit hard. More students are taking on loans and the rising cost of getting a foot on the property ladder means that under-25s are finding it harder than ever to stay afloat. For the over-65s, there is an element of duty to their debt.

“I am hearing more and more that parents are remortgaging in retirement to help their kids to buy a house or to bail them out of financial trouble. For less well-off pensioners, the more aggressive pursuit of council tax arrears by local authorities and the increasing cost of gas and electricity is forcing some into bankruptcy.”

She added that the “irresponsible” provision of credit to unsuitable applicants and aggressive advertising by “unregulated debt consolidation companies” is also helping to contribute to increasing debt difficulties.

For those who find they are experiencing trouble making repayments and handling their debts, a bad credit loan could be an alternative to filing for bankruptcy as they look to get back on their financial feet. And such a move could be particularly helpful for those finding that previous damage to their credit history has curtailed their access to mainstream avenues of borrowing.

However, as with any form of borrowing, consumers opting for such a loan should look to keep up with demands for payment, otherwise they could find their debt problems worsening. The warning comes as research carried out by moneysupermarket.com reveals that a number of loan lenders charge those consumers who miss a mortgage repayment, have cheques returned or go into arrears.

In addition, those looking for debt counselling from their credit provider were also shown to have been hit with various fees, furthering the money management difficulties felt by the most financially-vulnerable members of society. Louise Cuming, head of mortgages for the price comparison website, claimed that those falling behind with repayments “can expect to face some highly punitive and unjust charges”.

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