P2P “can halve credit card debt”
Statistics from The Money Charity reveal that over £32 million of purchase transactions were made every day in April this year by card, with a value of more than £1.5 billion. Since Barclays launched their first credit card in the UK in the 1960s, the little rectangles of plastic have become ubiquitous in many of our wallets. “VISA and “AMEX accepted here” signs are found in restaurants and shop windows from Taunton to Timbuktu.
A common misconception is that credit cards are solely used to enjoy otherwise unaffordable luxuries – in fact many people are now being forced to use them to pay off household bills, mortgages or food shops, and in doing so are unfortunately digging themselves into debt.
Outstanding debt on credit cards has almost trebled since 1998, to reach £55.6 billion, with up to £6 billion being spent annually just servicing the debt, which can lead to problems such as unemployment, family rifts, addiction and mental health issues.
Now one new peer-to-peer lending platform, Surrey-based Madiston LendLoanInvest, reckons that its debt consolidation products can cut the amount people owe on their cards by up to 50%. The company’s figures are based on an assumption that the average British consumer has 5 cards, each with an average interest rate of 17.1%. If they were to then take a typical 8% consolidation loan from this platform then conceivably their debt could soon be halved.
The company says that UK credit card debt could shrink to £2.8 billion per year through this technique, although at least one other website has figures that would contradict Madiston’s 5 cards per person estimate. Even so, given the traumatic effect that debt can have on a household, any alternative means of consolidating and controlling it is to be welcomed, so perhaps this is another avenue where P2P can have a positive effect on society and the economy.
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