Debt. Always with us?

ClearDebt take another look into the their debtor database and show their findings on how long it takes people to pay their debts, including some extreme examples such as the person who would need 694 years to become debt free

Is debt always with us? Well, for some, it would appear so. One unfortunate debt worrier who came to us had debt that would take more than 694 years to repay!

I’ve been taking a look at the people on our database who say their income is bigger than their outgoings (ie those that aren’t bust) and trying to work out how much effort it would take to become debt free. Aside from our number one debtor (with seven centuries worth of credit card and unsecured loan repayments – our figures exclude mortgages) we had  14 enquiries from people whose debts would take more than a century to repay and 45 enquiries from people who would take more than 50 years – and our estimates are based on all interest and charges being frozen: So, these periods, in the real world, would be in debt for an awful lot longer. We shouldn’t get things out of proportion though – these were a handful of cases in the context of the sample of  50,113 employed and self-employed people I was working with.

Mind you, once you get into the nitty gritty of the sample, I do think there are some things worth worrying about. OK, technically, these people are able to make some contribution to their debt (unlike the last blog group I looked at last time, whose outgoings exceeded their income and who, therefore, were getting deeper in debt every month). But 6% of them would take (assuming interest and charges frozen) more than ten years to repay what they owe and 44% would take more than two years (arbitrary I know, but I reckon that having unsecured debt the principal alone of which will take you more than two years to repay using all your disposable income is probably a decent measure of “problem debt”). Here’s a chart with the figures in more detail.

the time it would take to repay debt - ClearDebt client sample

Looking across the sample and not just at the hard cases it is clear that the less you earn, the more difficult it is to repay your debt. Nothing new there I guess. However, I think it is worth noting, bearing in mind this sample is of people who were worried enough to approach ClearDebt for debt advice, the huge difference between the lowest and highest earners.

Average months it would take to repay debt categories by earnings - ClearDebt sample

Those who take home (after tax and NI) less than £10,000 a year would take, on average, 13 months to repay all their debt (assuming interest and charges were frozen and they used all their disposable income to do it). Those taking home more than £50,000 a year would, on average (and making the same assumptions) take just two months to become debt free. And they were still worried enough to seek our advice!

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