Finances are particularly tight for many individuals in the UK at the moment and the outlook for the New Year does not look as though the situation is likely to improve any time soon.

A growing number of people are already struggling to stay on top of their regular household bills, as well as their home owner loan or mortgage and other debts, such as unsecured loans and credit card debts.

With many borrowers struggling to maintain their repayments on their home owner loan or mortgage and avoid falling into loan arrears, some are taking desperate measures to ensure that their loan repayments are covered.

A new report from the housing charity Shelter has revealed that some people are even turning to expensive pay day loans in order to cover the cost of their home owner loan or monthly rent payment.

The report showed that somewhere in the region of one million people in the UK have taken out a pay day loan over the course of the last twelve months, for the sole purpose of being able to pay their home owner loan or rent, despite interest rates on the loan of anything up to 4000 per cent.

Whilst many see this option as a solution to their problem, a pay day loan is only likely to make the situation worse and borrowers in such difficulty should talk to their existing lender first.

Campbell Robb of Shelter said “These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.”

“Turning to short term pay day loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and to eviction or even repossession and ultimately homelessness.”

Over the course of the past twelve months or so, the number of borrowers falling behind on their home owner loan repayments and falling into loan arrears and the possibility of repossession has been steadily reducing, largely due to help from government schemes and a more sympathetic approach towards helping people with their loans from lenders.

But the latest figures from the Council of Mortgage Lenders (CML), the Financial Services Authority (FSA) and HML Business Intelligence are all predicting a change of fortune for many people who are struggling with their home owner loans next year.

The reports forecast that the number of loan repossessions in the UK is likely to see a dramatic increase of around 7 per cent over the course of next year, before the figures start to fall again in 2013.

High levels of personal debt on things like unsecured loans and credit cards is likely to add to financial problems for many households who are already struggling to cover their home owner loan repayments every month.

Rising unemployment and a stagnating UK economy are likely to make the situation even worse than it could have been for many, despite the fact that interest rates on loans are probably going to remain at their currently low level of 0.5 per cent for the whole of next year.

The latest CML figures show that there have been around 27,500 repossessions so far this year and this is expected to reach 37,000 by the end of the year. However, with the current level of outstanding loan arrears on many home owner loans and mortgages, this figure is predicted to rise to somewhere in the region of a total of 45,000 repossession cases over the course of next year.

For some time now, financial experts have been offering advice and warnings to consumers in the UK about the dangers of spending too much over the Christmas period and falling into even deeper loan and credit card debt then they are already in.

The latest figures from the debt charity Credit Action have shown that the average person in the UK has around £4,226 worth of debt through unsecured loans, credit card and car loans, without taking into account outstanding balances on home owner loans, which then takes the total up to £55,808.

It has been estimated that somewhere in the region of a third of consumers will use some form of credit this Christmas, whether this is a credit card or a personal loan, to pay for their festivities and around 11 per cent of us will lose control of their spending and end up with unmanageable debt.

This will cause many individuals to wake up in the New Year with a financial hangover from their Christmas over spending and some may be unable to make all the necessary payments on their loans and credit card balances, on top of their existing commitments.

People finding themselves in this situation should seek professional debt advice as soon as they realise they have a problem. There are several loan debt charities around who are able to provide free impartial advice to borrowers who are struggling with their loans and other debts, as well as private debt management firms who can negotiate with creditors on behalf of the borrower to come to an arrangement on their monthly loan and card repayments.

Those who are struggling with their loan and card repayments should not leave it to long before they look for advice, as this is only likely to make the situation worse. The sooner the problem is faced, the easier it will be to fix.

The government announced yesterday (Tuesday 6th December) that they are to launch a national debt advice service for those individuals who are struggling to stay on top of their personal loan and credit card repayments and require free and impartial advice on how to manage their loan debts.

The provision of loan debt advice is to become one of the statutory duties of the Money Advice Service (MAS), which already provides general financial advice to consumers on a number of areas and issues.

Currently there are already several loan debt charities available who are able to offer free advice to consumers worried about their loan debts, including the Citizen’s Advice Bureau (CAB) and the Consumer credit Counselling Service (CCCS).

As well as the free debt charities, there are also many private debt management companies who are able to advise and also manage a person’s loans and other debts, but these will charge a fee for their services, which can often be rather expensive for the borrower.

The department for Business, Innovation and Skills (BIS), along with the Treasury had announced the decision to include loan debt advice as an area for MAS to cover as from the 2012/2013 tax year onwards, but this decision was confirmed in a publication yesterday and will now form part of the Financial Services Bill.

A statement from the Treasury said “The government believes this clarification should be made in order to reflect the importance of debt advice as part of the MAS’ activities.”

Although the introduction of debt advice as a service of MAS will undoubtedly be of benefit to many individuals who are currently struggling with their personal loan and credit card debts, debt advice and management will still be available through the existing debt charities and debt management companies.

A stark warning has been issued by a leading loan debt charity to households in the UK, telling people to get themselves some kind of financial plan in place if they are to avoid serious personal loan and credit card debt over the course of the next twelve months.

The Consumer Credit Counselling Service (CCCS) has issued the warning following the publication of a report from the Institute of Financial Planning, which highlighted the fact that somewhere in the region of 25 per cent of the adult population of the UK are not planning and sticking to a financial budget on a monthly basis.

The survey proved what many people already know, that a large percentage the population are currently depending on credit cards and personal loans to help them with their regular household bills and expenses and bridge the gap between their income and expenditure.

Clearly, depending on loans and credit cards for everyday bills is not a good idea and such a situation is unsustainable in the long term. As a result of this, the CCCS has warned consumers that unless they set themselves a clear and workable budget and stick to it, many people are likely to be facing unmanageable loan and credit card debt in the coming twelve months.

In a recent Debt and household incomes report, 6.2 million households in the UK were identified as being “financially vulnerable” to serious personal loans and credit card debt, leading to loan arrears and bad credit.

Delroy Corianldi of the CCCS said “It’s never too late to put your finances in order. Setting a clear budget now is the best way to withstand the financial headwinds of 2012 and beyond- and will leave you in a far better position to cope with any difficulties you may face in the future.”