Keeping credit and consumer borrowing in check. Avoiding bounced payments, defaults and another credit bubble.

Recently the Bank of England warned that high street banks could face £30bn of losses from consumer credit. Namely, defaulted credit cards and personal loans are at the heart of the matter. To ensure the consumer credit bubble avoids a painful burst however, all parties must keep an eye on borrowing to keep credit in check.

A balancing act

Offering and taking credit requires balance. Lenders must give what is appropriate and a borrower should ensure they can handle repayment. When external circumstances change (like financial markets), we begin to see difficulties.

When it comes to high street bank lending, we’ve previously seen the effects of unsustainable credit. The crash of 2007 had plenty of hard lessons for all. Since then, banks and lenders have been more cautious, until recently.

While the UK is yet to reach another financial crisis, many industry bodies have warned both lenders and borrowers that the current climate is not completely stable. Because of that emerging risk, credit must be monitored closely on both sides.

For banks this will be in the form of thorough credit checking mixed with lending reasonably.

For borrowers, this is simply being aware of what is owed and personal circumstance. AYOM's key advice to borrowers is to never solve one debt by taking another. If you are repaying a credit card for example, another credit card, payday loan or emergency loan is not the answer.

Learning from the past

It's a common pattern that markets rise and fall. Most countries see overall the standard recession, recovery, boom and contraction model. The challenge for policy makers, business leaders and households in these periods is to have as favourable a curve as possible.

That curve does not need to be as severe as the 2007 banking crisis. While for a period there is less financial stability, requiring tighter spending, even that can be manageable until we again enter recovery.

Help for businesses

When markets become stretched, many businesses or individuals with debts to pay will be forced to manage what they owe with what they have. For those with multiple debts, it becomes harder for creditors to ensure they specifically are prioritised.

The best way to ensure debtors keep creditors in mind is to dedicate time to chasing debt, especially if repayments have been missed or deadlines have passed. Companies like AYOM are able to do our part to help local businesses; landlords and lenders ensure they can continue to function.

When a debtor doesn't pay, it can have a vast domino effect. This applies to big businesses not paying just as much as one individual non-payer. We recently wrote an article about Four Seasons Healthcare in relation to this. Their inability to manage debts will have seen numerous suppliers short-changed, also now part of the chain of debt.

If you are a business requiring the use of debt recovery, tracing, credit checking, mediation or any other debt service, you can call AYOM on 0800 130 3357 or email enquiries@ayom.co.uk. With non payments often having long term effects on liquidity, it is advisable to seek expert assistance as soon as possible.

As experienced mediators we can also ensure any relationship between businesses or business and consumer is kept as amicable as possible. For more information about any of our services, you can visit our debt collection services page here.