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10 November 2018
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Thousands seek help as debts mount

by Brendan de Beer, in News · 01-11-2018 10:03:00 · 0 Comments

The number of people seeking help after running into excessive debt has this year climbed to just over 26,000 people. According to consumer watchdog Deco, there is also an increasing number of divorcees, widows and widowers knocking on their door for help after being unable to put food on the table while also paying their dues.

Thousands seek help as debts mount

The stark findings, published on Wednesday to mark World Savings Day, reveal that after 2017 reached a low in the number of people seeking help, this number has started climbing higher in 2018, possibly indicating a shift in the recent economic upswing.
Deco said that just under half of all requests for help come from single-member families, the majority of whom having lost their spouses to either death or divorce.
The consumer watchdog adds that there has also been a rise in specific reasons for people falling into debt, such as bad investments or failed business ventures.
Unemployment, which this week climbed for the first time since February 2016, is the reason most people say they are unable to meet their commitments, though they only account for 20 percent of the total.
As for bad investments, these were mostly the result of people creating their own businesses after being made redundant and then subsequently failing to pay their bills.
The percentage of people’s wages going toward paying off debts has also started climbing once more. After reaching 67 percent in 2016, it rose to 70 percent last year and in 2018, already stands at 72 percent.
The average family that has sought the assistance of Deco usually holds five bank credits, with their outstanding mortgage dues standing at 85,000 euros, they hold two personal loans totalling 16,500 euros and owe 7,500 euros on an average of two credit cards.
The average earnings of the people who sought aid, stood at 1,130 euros. Their monthly credit repayments stood at 820 euros and general expenses at 500 euros, which left them with a monthly shortfall of 190 euros.
Deco recommends that in order for people to avoid falling into a downward spiral of debt, they should ensure that no more than 35 percent of their monthly earnings are channelled towards the payment of mortgage repayments, credit card payments, along with personal and car loans.
The current trend has already raised alarms at Deco’s Support Office for the Indebted (GAS).
The Office’s Director, Natália Nunes, this week expressed fears that the number of families who are down and out will record a strong jump in the coming years, much as it did in the years following the 2008 financial crisis.
Nátalia Nunes was apprehensive of the negative impact rising interest rates would have on families’ budgets, coupled with rising unemployment and rents being pushed up for tenants with short-term contracts.
“Unfortunately, many families learned nothing from the crisis”, Nátalia Nunes told Público, adding: “Banks are also once again easing their demands in issuing credit, both for the purchase of housing and personal loans”.
She also expressed scepticism at new rules introduced the past summer by the Bank of Portugal, to restrict the issuing of credit, being totally successful.
The new rules are aimed at limiting families’ spending on loans to half their income, though many people are still managing to see their debts climb as a result of credit cards and the purchase of cars, while banks appear to be more focussed on ensuring customers can ensure their mortgage repayments.

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Edition 1500
10 November 2018
Edition: 1500

Read this week's issue online exactly as it appears in print.

Twitter

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