Could selling your endowment help you become debt free?

Publication date | 31/03/2010

Britons who have a number of financial commitments they have found difficult to juggle during the economic downturn may now be feeling the effects of climbing interest rates and missed repayments.

According to the latest Credit Action report, the average household debt in the UK stands at £58,083.

Indeed, everyday Britons pay a combined £187 million in interest repayments, which can often cause a bigger financial headache than the original debt itself.

Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers with credit card and personal loan debt had decided to sell their underachieving endowment policies to prevent their household finances slipping precariously into the red.

Have you started 2010 with financial concerns over debt?

The Credit Action report stated that the recession has taken a toll on many households, many of whom may have resorted to credit cards and personal loans when their income did not stretch far enough.

When mortgages are included, the average adult in the UK owes more than £30,000, a figure that represents 132 per cent of typical earnings.

Running a household and looking after a family can take a toll on finances and it could be easy to see why personal loans and credit cards are sometimes relied upon when an income is not enough to cover every monetary commitment.

Such financial difficulties could pile up when interest is taken into account. The Credit Action report found that the average interest paid by every household on their debt is £2,716 a year.

A spokesperson for the Consumer Credit Counselling Service (CCCS) said: "More competition from an increase in lending may cause interest rates on products to fall in the future, although CCCS doesn't recommend borrowing more to pay off existing debts as this can often push people deeper into trouble."

Endowment policy cash could help clear debts

Mr Radford, from aap, said rather than borrowing more money, some of its customers instead decided to use endowment policy cash from selling unwanted endowment policies to clear their balances.

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