Archive: Mon Dec 2016

Magellan Homeloans: The cost of Christmas

Christmas is coming…

…and so are the bills to pay for it. I hate to sound like a humbug, but the reality is that Christmas places a big burden on many households’ budgets. A survey recently undertaken by OnePoll on behalf of Nationwide, reveals that on average Brits spend almost half (44%) of their monthly salary on Christmas, with some spending considerably more. In Northern Ireland, for example, families spend 67% of their monthly salary on Christmas and in the North East the figure is 56%.

And its not a simple matter of spending reflecting the North / South divide. In the North East, the amount spent on Christmas gifts for kids is £207, whereas in the leafy suburbs of the South East of England, it’s a much lower £121.

Christmas comes full of temptations to spend, spend, spend but when the time comes to take down the Christmas decorations, the truth of Christmas can become all too apparent as the credit card bills hit the doormat.

According to The Money Charity, the total credit card debt in the UK is already (Sept 2016) a staggering £65.7bn, which works out at an average of £2,434 per household. If borrowers repaid only the minimum repayment each month, it would take more than 25 years for them to clear their debt.

Yes, we need households to spend in order for the economy to remain strong, but there is a fine balance between spending our way to recovery and spending our way into trouble. And, as a nation, we’re good at spending. For example, in July this year 40 million plastic card transactions were made with a total value of £1.74bn.

The consequence for some is that their finances run out of control. The Citizens Advice Bureaux typically deal with more than 4,000 new debt problems every day and more than 2,000 CCJs are issued every day with an average value of £2,030.

It does make difficult reading as we approach the festive season, but it’s nonetheless a significant issue for some. And, of course, unsecured debt can have a knock-on effect with other finances. Making mortgage payments can often be put into jeopardy if borrowers are juggling their money to repay other debts.

But, like Dickens Christmas Carol, let me give this sorry story a happy ending. Most people do resolve their debt problems and learn to become better at managing their finances as a result. And an impaired credit record doesn’t necessarily mean being cast into the financial wilderness forever.

If borrowers can explain why they got into difficulties and show that they have regained control of their finances, then an historical credit record should not necessarily hold them back. Lenders such as Magellan will consider deserving cases. Arrears, CCJs and other debt issues may stay on a credit record for up to six years, but that doesn’t mean borrowers have to wait until that six-year period is up before they are able to access credit once again.

I do hope you have a very Merry Christmas and a prosperous New Year.