What do I need rent guarantee insurance? … Millions stuck in a vicious circle of debt
A leading debt charity has warned more than 2 million people in the UK are stuck in the red with permanent overdrafts.
StepChange’s new report follows changes to overdrafts by some of Britain’s biggest banks, and a highly critical report published by the Financial Conduct Authority (FCA) in July which suggested that unauthorised overdrafts could end up being banned.
The StepChange report, entitled Stuck in the Red and based on a survey of the charity’s clients and an analysis of FCA data, found that about 2.1 million people were constantly overdrawn, going into the red in every month of 2016. Around half of the charity’s clients have overdraft debt, with the average amount owed put at £1,722.
Overdrafts are one of the most widely used credit products – the regulator found that nearly 13 million people have been overdrawn in the last 12 months – though they are designed for short-term borrowing. Critics have claimed they are a cash cow for banks: £1.2bn of the banks’ annual revenues come from unauthorised overdraft charges, the Competition and Markets Authority said last year.
People who were frequently overdrawn and regularly went over their limit could find themselves in a cycle of borrowing that was very difficult to escape from, said StepChange.
Furthermore, looking at StepChange’s latest personal and household debt trends for 2017 via their Mid-Yearbook shows us:
1. Demand for debt advice is growing
2. Personal debt levels are rising
3. More than two in five clients are behind on household bills
4. Our clients are getting younger
5. More renters are seeking advice
With so many people stuck in this vicious circle of debt and just one pay cheque away from poverty, it is no surprise that Rent Guarantee Insurance for private tenancies is on the increase.
(As a landlord) If you manage to house a non paying ‘professional’ tenant, before long your bills can be astronomical. Gain an understanding of the possible cost of this by adding up eight months rent minimum (it takes most landlords at least 2 months to decide to evict), add court fees, bailiffs fees, your time, stress and energy. Don’t forget to add in the out of pocket expenses such as damage to the property, removed boilers, copper piping amongst a whole host of other damage that can be done. Environmental health visits and other activities can also delay the process by at least 12 months.
Having protection against this, in association with Tenant Referencing UK’s unique Tenant History Reports, is one of the best methods of insuring against misfortune and potential bankruptcy.
Furthermore, one of the biggest falls for landlords is when they get into the mindset of ‘The Tenant Seems OK’ scenario. The importance of renewing a Rent Guarantee Policy (click here for more info).