Many middle and upper middle class citizens’ debts have increased since the global recession took effect.  Organizations which provide free debt advice to people from a number of UK counties stated that they have received more than double the surge of inquiries this year regarding debts from average to wealthier citizens.

Thousands of middle class citizens have suffered the brunt of the credit crunch and the statistics keep on rising.  A large amount of these debtors have salaries amounting to five-figures.  Among the reports included an IT manager who has a salary of £28,500 and has an unsecured debt amounting to £28,500.  Another one from Sussex have a debt totaling up to £110,000 from loans and credit cards and his income of £40,000 annually will not be sufficient enough to cover for it.

The consequences brought by the financial crisis, job losses is also a key factor why people are finding themselves in deep debt.  Other reasons, specifically rising mortgage payments and drop in house prices, are why debts and insolvency have risen among the middle class through the course of the year.  A lot of their money have been spent on their homes and improvement for it because of the assumption of a growth in equity which they thought would cover the cost.  A lot of the funds that was spent on home improvement also came from loans and credit.  Therefore, with the mortgage crisis causing house prices to fall, a lot of these homeowners have been overstretched leaving them with underpriced equity with outstanding debts.

Higher earners are viewed by banks and lenders as the ones who can eventually pay for borrowed loans and credit.  Therefore, they are the ones who are easily granted with loans and credit.  However, if spending and borrowing go out of control, they would simply find themselves at a debt hole.  Debt does not discriminate the middle class, but since a lot of people in the middle class invested a huge amount of their asset to their homes, they are the ones who are feeling it more.

The lack of discipline in borrowing easy credit has been the major cause of people’s debts and insolvency.  Living beyond ones mean can easily lead to debt.  The effects of the credit crunch and housing crisis have already taken its toll to a lot of people.  A person who is planning to obtain a significant loan or mortgage should first think about his present state and anyone who has just taken a mortgage or a loan within the past 15 months should re-evaluate his fiscal capability to prevent any future liquidation.