Warning on borrowing through credit to fund Christmas
Responding to the latest Credit Conditions Survey, financial solutions company Think Money warns of the danger of over-reliance on credit. The comment comes in direct response to lenders' expectations of a 'sharp' increase in demand for - and the rising availability of - credit card lending in the final quarter of the year.
Every quarter, the Survey asks lenders what borrowing / lending trends they've seen recently and what they expect to see over the next quarter.
The latest Survey (Q3, 2011) states specifically that 'lenders expected demand for credit card lending to pick up sharply in Q4' - and that demand for non-credit card lending was also expected to increase, albeit 'more modestly'.
At the same time, it reveals that we can expect credit scoring criteria for all kinds of unsecured lending to ease in the final quarter of the year - and we should see approval rates increase further as well.
A spokesperson for Think Money commented: "It's common for people to turn to credit as Christmas approaches - largely due to the extra financial pressures they can face at the end of the year.
"It's all too easy to be caught up in the 'holiday spirit' and many of us try not to think about the consequences of overspending until the season is behind us. Often, however, this leads to financial difficulties as the New Year gets underway.
"With a bit of forward planning, those difficulties can often be avoided. Christmas, summer holidays, weddings, 21st birthdays - events like these can be very expensive, but it's not as if they're unexpected. So rather than stretching one month's budget too far, it makes much more sense to sit down with a calculator, figure out the expected cost up front and set aside some money each month in the run-up to the occasion.
"Today, for example, most people can still expect two or three monthly salaries to arrive in their account before Christmas. In other words, it's not too late to take this approach this year - even if someone can spread the anticipated costs over just two months, this can make a significant difference, making it much less likely that they'll need to turn to their credit cards over the Christmas period.
"For some, however, it's a question of dealing with the debts they're already carrying. Even in this post-credit crunch era, many people are still focusing on repaying the debts they've been carrying for years - and again, spending some time with a calculator can really pay off, helping them decide on the best way to tackle their existing debts.
"There's no single 'best' way to tackle debts, of course, as it depends on the individual's situation. People who've passed the stage where consolidation's a realistic option may need to talk to their lenders about accepting lower monthly payments. This is something a borrower can undertake on their own, or with the assistance of a professional debt management organisation.
"However they choose to approach their debts, it's important that people take the time to explore their options and consider the pros and cons of each approach. The internet has made this much easier, since there's so much information readily available online, but we'd remind people of the need to get some personalised advice before committing themselves."
The Think Money debt management section can be found here:
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