The COVID-19 outbreak has significantly impacted the financial status of the country. Surprisingly, the recent lockdown has led many UK households to pay off their credit card debts and other loans earlier this year. While the lockdown is favourable to many British households, this has a serious repercussion in businesses, the economy, and the country as a whole.
In this article, we’ll explore the impact of the recent lockdown on credit card debts and loans in the country. We’ll also tackle what its implications are on consumers, businesses, and the economy.
What the facts and figures say
A news report shows that the country holds the highest record of UK households having paid off their credit card debts and other loans in recent years.
Moreover, the figure has drastically reduced the country’s overall debt by £7.4 billion. Statistics show that the outstanding balances on loans fell by £2.4 billion and credit card debts by £5 billion in April, this year.
How the lockdown impacts debts
Authorities wondered how the significant reduction of loans and debts occurred during the lockdown. Apparently, the payoff could be attributed to the fact that consumers had less access to business establishments, less demand for petrol, and no visits allowed to restaurants and bars.
Furthermore, short-term private lenders and personal loan providers had stopped issuing new debts during the lockdown period. For this reason, individuals had less access to consumer credits from lenders and financial institutions. On top of this is how consumers took advantage of interest-free overdrafts and payment holidays. They then used their extra savings to pay off their existing debts.
A surprising turnout of the event
In consonance with the surprising turnout of the event, credit experts provided great insights on this.
Initially, they thought that British people would take advantage of the payment hiatus. Given that most of them were either furloughed or confronted with uncertain employment, saving up would be a more viable option. Even so, many individuals opted to pay off their existing debts instead.
Delving deeper, credit experts believed that consumers couldn’t buy anything apart from their basic needs, as they had limited access due to the restrictions. With such circumstances, many households ended up having disposable income, which they resorted to using in clearing out debts. Hence, many used their money to pay off their credit cards and other loans to put themselves in a better financial position.
British people getting on top of their finances and repaying their debts is a commendable act. Not only do they reduce their debts, but they are putting themselves in a better position in the post-COVID economy. Who knows? With the possible global recession coming our way, the British people can come in prepared and ready for what lies ahead.
The decline in consumer spending and paid-off debts have a huge impact on the local businesses, the economy, and the entire country. Ultimately, we can expect significant shifts in business demand and consumer spending in the coming months—we can only hope for the best!
We provide relevant news and useful information on the UK banking and finance industry. Stay tuned for more updates on banking and finance in the country!