Since the COVID 19 coronavirus hit the United Kingdom, the economy has not yet seen the full impact of this virus and the short term effects on the economy.
One impact which has been felt almost immediately in the current pandemic is the loss of more than 600,000 jobs across the UK with more people out of work than it was ever first anticipated when the pandemic began.
COVID Debt Problems
The virus pandemic has unsurprisingly been detrimental to households struggling under debt, it is a known fact that most households are living from paycheck to paycheck with the majority of UK households having insufficient savings to meet mortgage payments for more than 2 months without additional income.
More and more people are looking for debt help and a solution which will help them become debt free.
The Two Main Debt Solutions: The IVA and The DMP
The two main debt solutions used by people in these situations: The IVA (Individual Voluntary Arrangements) and the DMP are both good solutions for people who have varying levels of debt, with the IVA being more commonly used for people who have more than £5,000 of debt.
The DMP (Debt management plan) is a less formal financial solution commonly used by people who have less than £5,000 of debt, and doesn’t offer the same legal protection as the IVA.
- It is important to assess the pros and cons of each debt solution, especially the IVA, as it is a long term financial commitment which may impact your credit rating.
How The COVID-19 Pandemic Is Causing Problems To Peoples’ Financial Situation
With the rate of unemployment increasing due to the amount of businesses closing and having to lay staff off their payroll, the challenges to people at home is obvious, it is expected that the rate of arrears on unsecured credit will increase sharply due to the impact on peoples’ income, particularly people not covered by the furlough scheme, which contributes 80% of the persons’ salary, however some people are not covered by the scheme.
What is unclear at this stage of the pandemic is the short term impact on the economy as a whole, which will become evident later in the year.