Managing your personal debt can be tough.
With hundreds of different rates on credit cards and personal loans, keeping track of your debt interest can be tricky. Making sure you are paying the lowest interest rate possible is vital to ensure that you are actually clearing the debts you owe; not simply paying off interest charges.
However, for the average consumer, the passing of Debt Freedom Day in the UK means that any cash you earn from now on in 2011 will go into your pocket rather than clearing your debts.
Earnings from the first 45 days of the year used to pay debt interest
According to a leading professional advice website, Brits spend the first 45 days of the year earning money just to cover the interest they have to pay on their credit cards and other unsecured debts.
February 15 marked Debt Freedom Day, the day on which the average consumer in the UK will have earned enough to cover their debt interest for 2011.
UK consumers collectively owe £58 billion on credit cards and a further £120 billion on personal loans. They are charged average annual interest of 10.55 per cent on loans and 16 per cent on credit cards.
Consequently, the average unsecured borrower will pay £2,502 this year in interest on a personal loan, and a further £398.35 in interest on credit card debt. It will take someone on the UK’s average salary 45 days to earn this sum.
Debt Freedom Day earlier in 2011 than 2010
However, there was some food news for consumers, as Debt Freedom Day was five days earlier this year than it was in 2010.
Unbiased, the website that conducted the research, attributed this improvement to a combination of people taking on less unsecured debt during the past year in addition to more people paying off their unsecured debts.
