Debt warning as households worse off

Debt warning as households worse off 30/8/11

Local families are £11 a week worse off than they were last summer, according to a new report.

Western Isles Citizens Advice Service (WICAS) has issued a stark warning to local people, urging them not to be tempted into the ‘misery’ of debt.

The Income Tracking Report, published by Asda, says that the average UK household had £166 per week of discretionary income to spend in July, which is 6.4% lower than a year earlier. That works out at £11 per week.

WICAS’ Senior Money Adviser Helen Smith said:“To lose £11 from your weekly budget is a blow to any household. But many families in the islands were already on the poverty line this time last year. For them, losing this much is quite devastating.

“Sadly the report comes as no surprise to us. We’ve seen ample evidence here at the CAB of how people are really struggling to cope with the rising cost of living.”

She added: “Prices are rising all the time – particularly fuel and food prices – but household incomes are either frozen or falling. So, this ‘double whammy’ is pushing huge numbers of people into financial crisis. And it is leading many of them into debt, which of course just makes their problems worse.

“So we want to issue this warning today to anyone who is struggling to pay the bills: Short-term debt is not the answer. If you turn to a loan shark, or stick it all on your credit card, that might get through this month’s bills, but what about next month? All you are doing is storing up problems for yourself. The slick TV ads for ‘easy’ short-term and payday loans might seem very attractive, but their repayment rates are extortionate. And you always have to ask yourself, where are you going to get the money to pay it back?”

Ms Smith said: “Here at the CAB in each of the islands we see people every day who have got into that cycle and soon found themselves thousands of pounds in debt and unable to control it. Many of them are suffering ill health and relationship breakdown as a result. Do yourself a big favour and give that misery a miss.

“We do understand the pressures that force people into debt. If you can barely pay your bills from week to week and you suddenly lose your job or face a cut in wages, how do you pay your rent or mortgage at the end of the month? Many feel they have no option but to borrow, and with banks refusing to lend they turn in desperation to loan sharks or payday loans or other high-interest lenders, and so they get into a spiral of un-manageable debt. Its either that or lose your home. We do understand that this is the reality for many families. After all, we see it in our office every day.”

She highlighted:“But there are always options. And the good news is that support is available. Here at the CAB we offer expert financial advice to anyone who needs it, and our advice is always free, confidential and completely impartial. So if you are worried about your ability to pay your bills, don’t just turn to the loan sharks and credit cards. They don’t want to help you. We do. Come and see us at our office in Lewis or Uist (where our money advisers are based) and ask to speak to our Money Adviser.

“I know many people find it difficult to ask for help, particularly if you have never been in this situation before. But there really is no shame in feeling under pressure at the moment – its happening to everyone. Our advice is completely confidential, We won’t criticise you – we’ll just sit down with you and go through your finances in a calm, constructive way. We’ll advise you how to maximise your income – for example you may be entitled to claim benefits you don’t know about. And we’ll help you to plan and budget effectively. If borrowing really is the best option for you, we will advise you on how to go about that in a sensible way. But it’s important that you come as soon as possible – particularly if you are already in debt. Because one thing is for sure: the longer you delay the worse things will become.

“If people want to contact the CAB they can do so by phoning 01851 700088 or 01870 603807, or in person at our office in Westview Terrace, Stornoway and Winfield Way in Uist, or by email to helensmith@lewiscab.casonline.org.uk