Financial Advice Benefitting Consumers As They Pay Off Debts

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New research from unbiased.co.uk, the professional financial advice website, reveals 2010 was a record year for consumers looking to repay their debts, but savings levels suffered as a result of it.

The “Savings Brake” research from Unbiased reveals the ratio of how much we are borrowing (including unsecured borrowing and does not include equity release and mortgages) contrasted with how much we are saving. During Q4 2010, borrowers repaid 14p of debt in every pound they saved – a fall from 16p in Q3. Overall, 2010 was a record year for consumers to repay their debts, reaching an all time high of repaying 19p in every pound saved during the first two quarters.

The overall trend of 2010 is that consumers have become even more conscious of their debt levels and have been working hard to repay what they have borrowed – as overall repayment levels have spiked in 2010 when a total of £12,081 million was repaid. The ongoing strain on personal finance and the volatile economic environment and uncertainty in the market could 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.

However, savings levels have taken a steady turn for the worse, as they fell during each quarter of 2010. The year started off with almost £20 billion of new savings in Q1, but this has dropped to just over £15 billion in Q4 2010 – an overall drop of 20%, spelling out concern for people’s future financial provisions. It appears the low interest rate environment is discouraging savers, resulting in more of them instead choosing to pay off their debts.

Karen Barrett, Chief Executive of Unbiased, comments: “Brits’ borrowing habits returned to better health throughout last year and it is encouraging to see the trend for debt repayment increasing in 2010 compared to 2009. However, debt repayment levels have tailed off towards the end of last year, therefore it will be interesting to see how this will develop during 2011."

“As the cost of living increases and with higher taxes on the horizon, combined with continuing low interest, we will see an effect on consumer savings habits and our figures already show overall savings levels have steadily fallen over the past few years. 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 financial advice from an independent financial adviser (IFA). An IFA can advise you on striking the best balance between borrowing and saving, as well as look at your overall financial position and recommend products from the whole of the market. You can carry out a free and confidential search to find an independent financial adviser near you by visiting unbiased.co.uk.

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