Struggling Borrowers Should Get Debt Advice Before Cutting Back
Released
on: May 18, 2009, 7:35 am
Author: Think Money
Industry: Financial
Financial
solutions company Think Money have advised people who are struggling
to repay debt tocarefully consider how and where
they cut back on their spending, following the release of a study
showing that millions of people have cut back on insurance in
the past 12 months in order to save money.
The
report from Sainsbury's Finance estimated that almost one million
(946,000) people have either cancelled or reduced their home contents
insurance cover in the past 12 months as a direct result of their
financial situation, while over half a million (532,000) have
cancelled their life insurance policy for the same reason.
Meanwhile,
432,000 car owners were estimated to have reduced the amount of
car insurance they had, while 349,000 people reduced their home
buildings insurance and 104,000 reduced their pet insurance.
A
debt expert for Think Money said that while cutting back in certain
areas could be a good way of saving money in the recession, people
should be careful about where they decide to cut costs.
"For
example, increasing numbers of people are buying food from 'budget'
stores, rather than the 'big' supermarkets they are used to, which
can save a lot of money. Likewise, people are buying more second-hand
cars, eating out less, etc. - and these are all relatively sensible
areas in which to cut back.
"However,
when it comes to cutting back on insurance, people are taking
a risk. Insurance is there for a reason: it protects against unexpected
large bills that can occur at any time. Without it - say, the
person's house is flooded - people can find themselves in a far
worse financial situation than if they had simply kept their insurance
policy, and that brings a real risk of falling into debt."
The
Think Money spokesperson added that even cutting back in 'sensible'
areas is not the key to financial security, unless people are
strict with their finances.
"Setting
a strict budget is a very important part of financial management,
and that budget must be realistic in terms of how much needs to
be put aside for essential costs and how much can be kept back
for non-essential spending.
"People
should also ensure that if they are freeing up money by cutting
back, that money should be put towards their debts rather than
non-essential purchases.
The
spokesperson said that anyone who finds that cutting back on costs
alone is not
enough should seek professional debt advice.
"Ideally,
anyone who finds themselves struggling to repay debt should speak
to a professional debt adviser at the earliest opportunity. A
debt adviser can help the borrower to establish the best course
of action for reducing their debts - and the sooner this happens,
the less difficulty the borrower is likely to face."
Contact Details: Pennington House
Carolina Way
South Langworthy Road
Salford Quays
Greater Manchester
Melanie.Taylor@thinkmoney.com
0845 056 6480
2012
