Many consumers struggle to pay off credit

17 May 2012, 4:45 pm   -   Source: AAP

One in four consumers struggling to meet credit commitments could fall into a debt spiral if Australia suffers an economic downturn.

More than 2.7 million Australian consumers are finding it hard to meet their credit commitments, and many are likely to try to overcome difficulty by applying for more credit.

Data and intelligence provider Veda said on Thursday that about one in four among this group of consumers could fall into a debt spiral if Australia suffers an economic downturn.

Veda's twice-yearly Australian Debt Survey found that in a time of economic stress 25 per cent of struggling consumers would seek to increase their credit card limit, mortgage or loan.

In tough times, most consumers would draw upon their savings, before borrowing from family or drawing upon their superannuation.

Veda said that, currently, consumer credit reports do not show a person's credit limit or if they are failing to make minimum payments on their credit cards or loans.

"It makes it easier for someone already in trouble to get yet more credit, pushing further into a downward debt spiral," Veda said.

But upcoming changes to credit reporting would include a person's current credit limit, number of credit cards and a record of failure to make the minimum payment on time.

The Veda survey found that Queenslanders and South Australians were those finding it the hardest to meet repayments, and West Australians the least.

Veda said just 57 per cent of people believed that their debt was within their budget.

That rate has been steady since March 2009 when 64 per cent of Australians believed that their debt level was within their budget.

Veda said few people having difficulty with paying their debts sought professional financial counselling, with workers earnings more than $70,000 per year, white-collar workers and workers under 50 years old more likely to do so.

The survey covered 1,052 respondents who were interviewed in early March.

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