Have you reached your debt ceiling?

by CCCS on 02 August 2011  |  2 comments
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Are you borrowing more and more just to pay off your debts?

It’s been hanging over you for weeks, and you need to sort it out. You know you need to speak to the other half over the weekend, because by Tuesday afternoon you’ll be in the red and have lots of unpaid bills.

You wait until four days before the debt ceiling is reached to seriously discuss the need to increase your borrowing, but they bemoan the fact that constantly living beyond your means only leads one way; to a painful debt crisis. You say that you need to increase your incomings; the other half says that you need to reduce your expenditure first.

You try to thrash out an agreement over the weekend to extend your borrowing once more, knowing deep down that it’s leading to nowhere. You’re going to have to make painful cuts.

It’s not just that you’re living beyond your means, it’s the fact that you’re already struggling to make the payments on what you’ve already borrowed and the money’s going to run out soon.

Forget the US government, this sounds like life in a lot of households up and down the United Kingdom each and every month.

Hit the roof

A lot of UK households raise their debt ceiling on a monthly basis so that they can continue pay the bills as they become due. They borrow more and more money than ever just to cover current costs (the dreaded ‘consolidation loans’ being an obvious example).

It’s often the case that they attempt to make cuts to spending while borrowing more, just to survive.

Borrowing more money just to be able to afford to pay what you already owe may seem like madness, but a lot of consumers fear defaulting on their debts more than anything.

Default and you’re done; it’s listed on your file. We’ve blogged before about people’s obsession with credit ratings and fear of being ‘credit blacklisted’ and it seems to be the last thing consumers want. No lender will go near you if you lost your “AAA-rating”.

So people continue to borrow further money, and get deeper and deeper into debt, living an unsustainable lifestyle. All fuelled by steadily more expensive, and less affordable, credit.

Then one day the sums don’t add up anymore and there’s a crash; debt collectors, court cases, CCJs, Bailiffs, charging orders…

Finding common ground

You spend all weekend arguing with the other half. You say you need to borrow more and they agree because they don’t want unpaid bills but they want you to cancel the Hire Purchase car and the golf lessons. Savings have to be made alongside a temporary rise in the debt ceiling.

You thrash out a compromise.

However, you know that hard times are ahead as you’ve promised the other half that you need to make cutbacks and get rid of at least some the debt (even though, ironically, at least half of it was incurred by them). You know they’re going to work out an austerity budget soon.

Tuesday comes and your bills do get paid, just in the nick of time. What a relief, for now. But whether it’ll happen in a couple of weeks or a couple of years, you’ll have to go through more negotiations soon as the debt is out of control. There’s no escape…

If you’ve fallen into a spiral of borrowing just to survive you might want to consider taking some impartial advice. You can use our online debt help service to get instant tailored advice. This advice is available free to all families or individuals with UK debt.

Unfortunately at this time we can’t offer our service to world powers or major political leaders.