600,000 Britons unable to refinance debt

by Gill Montia

Story link: 600,000 Britons unable to refinance debt

TDX Group, the debt management analyst that provides services to the corporate sector, has published an alarming report that suggests nearly 600,000 Britons will be unable to refinance their debts this year.

According to the report, around one million Britons have collectively amassed £25 billion of unsecured debt that they cannot repay, giving an average financial headache of £25,000.

In 2007, around 400,000 people remortgaged their property or applied for new credit cards or personal loans, to pay off existing debt.

Also last year, approximately 300,000 consumers opted for bankruptcy, debt management plans or individual voluntary agreements (IVAs).

The latter involve the creditor accepting a reduced sum in settlement of the debt, which is paid off over an agreed period.

Mark Onyett, the chief executive of TDX, believes that 2008 will see a sharp rise IVAs, with figures possibly doubling as the availability of credit that can be used to pay existing debt dries up.

While companies that specialise in IVAs can save money and even bankruptcy for their clients, they typically charge between £5,000 and £9,000 to secure an agreement with a creditor. Fees are then taken from the client’s repayments.

However, around 45% IVAs founder because repayments are not completed.

In these cases debtors are forced closer to bankruptcy because the fees charged by IVA companies are added to their existing debt.