Advanced Search

Wanna Argument?

Forever on the Never-Never?

In October 2006, figures released by National Statistics indicated that UK consumer debt has risen to more than £1 trillion. At the same time, data from the Insolvency Service showed that in England and Wales the number of Individual Voluntary Arrangements (IVAs) - an alternative to declaring yourself bankrupt - is rising steeply.

Why are people so heavily in debt in the UK? Isn't the economy supposed to be stable and strong? What problems are being stored up as a result of this indebtedness? Is debt always bad? Are there examples of it being used constructively to resolve larger problems? In this 'Wanna Argument', our contentious twosome 'put the world to rights' over personal debt.

High and Dry

Splashing Out

	Was that you I saw going into the pawnbrokers earlier? Bit desperate for cash? You could always give me a call, you know?
			Yeah, thanks. But I already owe you some from the other week.
	Don't worry about it. Let me have when you can.
			That's good of you. I honestly don't know where it all goes, you know. My accounts are a mess.
	Credit cards maxed?
			Yep, all five of them! That's why I was pawning the Rolex. Pay off the balance on one of the cards, else the interest hits the roof.
	Umm, that's not one of those Rolexes you sold me last year, is it?
			The very same. And I know what you're thinking. 'It's not worth very much.' That's exactly what they said in the pawn shop.
	Well, they're not stupid are they? How d' you get into this financial state, then? Charmaine been living it up at your expense?
			Well, there's her and her new bloke's new flat. That needed decorating. Then I had me satellite subs due. On top of the mortgage going up, when the gas and leccy bills came in it just about did me in.
	You still paying for satellite, are you?
			Yeah, cheaper than watching the footie down the pub these days.
	What about work? You're still OK there?
			Doing extra shifts just to pay for next year's holiday in Florida, remember?
	Sounds like you're overdoing it on the spending front, mate!
			Don't you start! That's what the bank manager says! I said to her I need a break, just like everyone else.
	What did she say to that?
			Have a week in Cleethorpes and forget Disneyland! I can't believe I'm the only one with money worries.
	I don't think you are.

Is Britain on the brink of a debt explosion?

	Blimey! I'd heard it was bad, but not quite as bad as that!
			Yeah, that's a lot of people having to pay a visit to their local pawn shop.
	Uh huh, and a lot of dodgy Rolexes getting handed in.
			No wonder they didn't offer me much for mine! What's going on then?
	People do seem to be living beyond their means.
			Maybe, but my means are a lot less than most other people's.
	I think I know what your bank manager would say about that.
			Well, we can't all be as financially astute as you. Goody-goody!
	I just don't spend what I haven't got, or don't expect to get in, mate. That's how I avoided getting stitched up financially. That and following the advice of the head honcho at my bank.
			What was that then? One of those 'consolidate all your debts into one' pieces of advice?
	Nope, more the kind of 'never have a credit card' type of advice!
			They never said that, did they?!
	You'd better believe it!

Why are people so in debt?

			That's exactly what I need! A low monthly payment to cover all my debts would sort me out.
	Yeah, you're right; it probably would sort you out - but not in a good sense.
			How do you mean?
	Well, I reckon that there's a reason why you pay a low monthly amount for this sort of debt. And you don't need to be an economist to work this out!
			... ... No, sorry, you're going to have to tell me.
	Well, you're combining all your credit card debts into one big loan, right?
			With you so far.
	And making low repayments on that big debt.
			Yes...
	Well, how do you think the company makes any money?
			Does it matter?
	Not to you, maybe. But there has to be a catch, don't you think?
			OK, but what is it? What's the catch?

Are there any 'catches' to debt consolidation?

	I'm fairly sure that's given you plenty to think about!
			Well, what are we saying here? Is all borrowing bad? What about sensible stuff like where you actually repay the loan?
	Well, there were those early repayment penalties, I suppose. But I've always had an overdraft, and I've got a big mortgage, so I suppose I'm not one to judge others.
			There's a first time for everything I suppose!
	Steady on. I might have to call in that IOU of yours.
			Now you're sounding like my bank manager.

Is borrowing bad?

	So I can assume that you're going to do some research into how to get out of your financial mess?
			Looks like it. I haven't got any more of those dodgy watches to pawn!
	Yeah, well, you should also look into cutting down on some of the luxuries you spend your money on.
			Killjoy!
	Think of it as me just looking after my investment.
			Makes you wonder how people in poorer parts of the world get by, doesn't it. I mean, what if I had no job and there was no social, what would happen to me then?
	At last! You're developing a social conscience.
			Well perhaps all these chats we have are starting to have an effect.
	I doubt it, but let's wait and see.

What's the experience of borrowing in the developing world?

	Wow, that's a fairly impressive way of dealing with poverty, don't you reckon?
			Never heard of them before. Perhaps they're thinking of opening a branch up round here?
	Don't think you'd be able to cope with the social pressure to repay, do you?
			Why not? I put up with you telling me to sort out my finances, don't I?
	OK, but what about those rules that borrowers have to agree to? Reckon you could cope with them?
			As long as I could keep my satellite TV, I don't see a problem there!
	Let's get a copy of the rules and see if you could cope. In the meantime, I have to go off to work.
			What? Is that the time! I should have been at work half an hour ago!
	Serve you right for pawning your watch!

Extension Activities and Further Information Sources