Selling your endowment policy could help solve your debt problems

Publication date | 25/02/2010

The first 50 days of the year are spent paying off the interest on debt - before the actual amount borrowed has even been touched.

A new study by Unbiased.co.uk found that Saturday (February 20th) marked Debt Freedom Day, with income now being able to be put towards actual debt.

Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers had decided to sell their underperforming endowment policies in order to raise the money required to clear as much debt as possible.

Debt commitments rein in household finances

The survey by Unbiased.co.uk found that last year credit card debt in the UK rose by more than £4 billion to stand at over £54 billion, while personal loan repayments also increased.

Having to stretch an income to meet interest repayments could prove to be a financial headache for Britons, especially if their debt commitments mean they are unable to cover the cost of other expenses.

Relying on more credit - including store cards and personal loans - could seem like a convenient short-term solution, but this may only make the matter of meeting interest repayments a serious problem for the long term.

Commenting on the fact that the first 50 days' income represents the level of interest repayments on debt, Karen Barrett, chief executive of Unbiased.co.uk, said: "It may come as a shock that Debt Freedom Day actually only marks the day when we have paid off the interest on our debts, rather than the actual debt itself! Debts can quickly mount up to a considerable sum and this date demonstrates that debt is something that we need to take control of and actively manage."

Selling your endowment policy could help you manage debt

Mr Radford, from aap, said some of its customers with large amounts of debt had decided to sell their unwanted endowment policies in order to raise the money required to clear their financial commitments which were accruing larger amounts of interest.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

Reasons to sell your endowment policy