With household bills soaring and wages remaining flat, individuals are becoming burdened by debt that is only getting worse, according to a new study …
With household bills soaring and wages remaining flat, individuals are becoming burdened by debt that is only getting worse, according to a new study by independent price comparison website uSwitch.com.
The research found a quarter of borrowers, equating to seven million consumers, will not be able to pay off their non-mortgage debts for at least three years. Meanwhile, seven per cent of borrowers believe they will never be able to pay it off.
There have been signs in recent months of an economic recovery in the UK, although many people are not feeling any better off, with four in ten (39 per cent) claiming their debt has increased in the last 12 months.
Indeed, the average person is currently £2,423 in the red and this amount rises to £3,385 for those aged 25-34, with 35-44 year-olds not too far behind with average debts of £3,140, which is very worrying.
Interestingly, the research shows it is in fact the higher earners who carry the most debt, owing £577 more than the average person. Aside from their mortgage, those earning between £40,000 and £70,000 owe an average of £3,000. They are also more tolerant of their debt levels and are comfortable owing over £5,000 before they begin to worry.
Meanwhile those earning below £40,000 become anxious when their debt nears the £4,000 mark.
In order to repay the outstanding bills, more than one-fifth of borrowers (22 per cent) said they will need to cut back on daily essentials such as food and petrol, while a further four in ten (39 per cent) are sacrificing luxuries such as holidays this year as they try to balance the books.
When people seek financial help, most prefer to turn to friends and family (37 per cent), while a quarter (23 per cent) will opt for an overdraft or will put money onto plastic (26 per cent), which is worrying as credit card debt can quickly mount up.
One of the most concerning findings in the research is that seven per cent of borrowers have ended up further into the red in an attempt to clear priority debts.
In terms of gender, men are more likely to amass larger debts than women, despite the figures showing they earn 25 per cent more than women. Over the last year men have borrowed an average of £2,127, compared to the relatively modest £1,358 taken out by women. They also appear to be less concerned about their debt and typically do not begin to worry until it hits £3,902, compared to £3,467 for women.
Michael Ossei, personal finance expert at uSwitch.com, said people are struggling to pay for their ever-increasing household bills and many are being forced to turn to debt just to stay afloat.
"Instead of trying to play catch up by taking out more loans and credit cards, the first step is to make your debt manageable again. Consolidating your debts will help you fix repayments with one provider at a rate that is more affordable over a defined time period. For example, you could borrow £3,000 for a three year period at a rate of seven per cent and pay back £92 a month," he added.
By James Francis