Aussies headed toward debt spiral

by Adam Smith18 May 2012

While one out of five Australians are having trouble paying their current level of debt, a quarter say they would apply for more credit if the economy turned sour.

Veda's Australian Debt Study has revealed that 21% of Australians are already struggling to make payments on their credit commitments. The credit reporting agency claimed around 750,000 Australians risked falling into a "debt spiral" in an economic downturn.

Consumers showed varying responses to the possibility of economic stress, with 66% saying they would draw on their household savings while nearly one third said they would borrow from family. Twenty-five per cent said they would increase their credit card limit, mortgage or personal loan to make ends meet.

Veda senior advisor Matthew Strassberg claimed the controversial positive credit reporting regime would help to keep consumers from falling into an over-reliance on credit in the face of financial difficulty.

"Credit reports do not show a person’s credit limit, or if they are failing to make the minimum payment 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," Strassberg said.

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