How the credit crunch is your fault

You might not want to believe it, but we all owe the banks money...

The credit crunch has painted the banks as at best a group of highly-paid loafers, and at worst a group of greed-hungry spivs pulling the wool over everybody’s eyes.

In both scenarios the banks were out to make a buck and they didn’t seem bothered how close they sailed to the wind to make the cash they craved, even if it ended with taxpayers having to bail them out and foot the bill.

But what about our debt to the banks; the personal credit we happily borrowed and spent on cars, clothes, holidays and whatever consumer wish took our fancy?

Sure, they charged us exorbitant rates to repay the debt but did we scrimp, save and repay it? Er no…many of us didn’t repay it. At least not all of it.

Debt written off

New figures from Credit Action, the National Money Education Charity, show that in the first quarter of 2011 the banks wrote off £1.89 billion owed to them by customers. Of this money, £866 million was in credit card debt that had been spent by the banks’ customers and not paid back.

When they say wrote off, this was mostly the result of the client going bankrupt or into another form of insolvency such as an IVA.

This amounts to £20.71 million per day that we, the general public, owed that the banks won’t ever get back. One person every 60 seconds goes bankrupt or enters an insolvency agreement every working day in the UK.

Living beyond our means?

The banks lent us the cash in a push on selling credit and we spent the money that fuelled the jobs and the economy. Like any bubble it just got bigger and bigger until it burst.

Now we’re paying for the banks, but it could also be said that as a society we all lived beyond our means for the past 20 years.

The country is facing austerity and so are many individuals and families.

Bankruptcy or indeed an IVA are not easy solutions to take to debt problems. Both are legally-binding forms of insolvency and both are a big decision to take for those in financial hardship.

We also know from our own figures that a lot of debt problems are brought on by sudden unemployment, redundancy or a change in personal circumstances that were not foreseen. The credit crunch has had a knock-on effect on all of this.

Loan companies

Often the devastation caused by the credit crunch has been mainly felt by those who gained the least from the boom time. The proliferation of short-term loan companies and modern day pawnbrokers that are rapidly appearing on every high street are aimed at those struggling the most. These high interest, short-term loan companies are an increasing problem for people who need credit and can’t get it any other way.

Affordable credit is always useful in society; it greases the wheels and helps people and the economy. We as individuals, companies and a banking system need to make sure that we don’t let the engine get out of control next time.

The government bailed out the banks and asked the taxpayer to foot the bill. The taxpayer who has their own debt problem is not so lucky, but they can seek free and impartial advice from CCCS. The first place to start is Debt Remedy. We can’t promise you a bailout but we can help get you on the way to a debt free future.