Brits Rush To Pay Off Debts Instead Of Saving

Brits are rushing to pay off their debts rather than boost their savings accounts as consumers struggle with their personal finances in these turbulent economic circumstances.

Consumers have been trying to pay off their debts instead of putting money into savings accounts according to new research by unbiased.co.uk, a professional advice website.

In the first two quarters of 2010, consumers were repaying 19p off their debts for every pound saved, which is an all time high, although this ratio did fall towards the end of last year.

The debt repayments were for unsecured borrowing such as personal loans and credit card debts and do not include loans secured against property such as mortgages and equity release schemes.

The ongoing strain on personal finances and the volatile economic environment may well explain why there has been less appetite to take on more debt.

Borrowing is also being restricted by it becoming increasingly difficult for consumers to secure loans.

The rush to pay of unsecured debts are hitting savings levels hard, though. The amounts being saved by consumers fell steadily throughout last year with an overall drop of 20% in the amounts being put aside for the future.

Low interest rates are certainly deterring savers, encouraging them to pay off their debts instead, however this may have consequences for the future, as Karen Barrett, Chief Executive of unbiased.co.uk explains:

“This trend highlights a real concern for the nation’s personal finances as we see people dipping into what is essentially their financial safety net.

In order to ensure you are making the right choices with your finances, it is vital to seek professional advice from an independent financial adviser.”