In this essay I shall be discussing the factors which influence the level of and access to unsecured debt held by households. In the early 1980’s the conservative government headed by Margaret Thatcher, began to liberalise the financial industry. This promoted more competition between firms to attract customers, and offer credit facilities to a wider range of consumers. Companies used aggressive marketing to attract customers, but the amount of different products available on the market to customers made it confusing, and many took on loans and credit cards without fully understanding the product they were buying, or the interest rates they would have to pay. This resulted in a wider range of consumers having access to buying goods on credit and consequently building up debt. Access to unsecured debt, was made even easier with the introduction of the internet, people could apply for financial products such as loans and credit cards, without having to make a phone call. With marketing and incentives for customers to take out their credit cards with 0% introductory offers, many took on these cards without thinking of the actual interest rate they will pay once the introductory rate ends. With on-line shopping increasing year on year, paying for goods by credit/debit card had overtaken cash sales in 2004. The fact is debt is socially acceptable, from an early age people are encouraged to get into debt in the way of student loans and mortgages. Before liberalisation of the financial industry, consumers would save for what they would like to purchase, but now the consumer society of today’s world want to buy the product now, and will use a form of credit to purchase it, whether they use a buy now, pay it later scheme from the retailer, or credit card this all attributes to their unsecured debt level. In 2004, total UK personal debt passed the £1trillion; by July 2010 it had reached £1.46 trillion. £1.24 trillion was secured against property the remaining £220 billion...
References: Callaghan, G., Fribbance, I., and Higginson, M. (eds) (2012) personal finance, Basingstoke, Palgrave Macmillan/ The open university.
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