One in four borrowers trapped in debt for three years or more
Trapped: almost one in four borrowers (24%) will take at least three years to pay off their debt – 7% of these don’t think they’ll ever be debt-free
In the red: aside from mortgages and students loans, the average Brit has debts of £2,423 – this climbs to £3,385 for 25-34 year-olds
High earners owe the most: those earning between £40,000 and £70,000 owe an average of £3,000 each – £577 more than the average Brit
Men borrow the most: despite earning more, men have borrowed £769 more than women in the last year – and have less hang-ups about debt
Regions: those living in the East Midlands carry the least debt (£1,988) while those living in Yorkshire and Humber owe the most (£2,902)
Over one in three borrowers (37%) have turned to their family to help pay their bills, but consumers won’t seek professional help until their debt hits £5,200.
As bills rise and salaries remain stagnant, desperate borrowers are finding themselves stuck in a downward debt spiral according to Uswitch.com, the independent price comparison and switching service. The research highlights the extent of Britain’s debt culture, as a quarter of borrowers, some seven million consumers, will not be able to pay off their non-mortgage debts for at least three years. Worryingly, 7% of borrowers – some four million consumers – believe that they will never be debt-free.
Recent figures suggest that the UK economy is on the mend, but many consumers are feeling far from better off. Four in ten (39%) say their debt has increased in the last 12 months, with the average person currently £2,423 in the red. Worryingly, 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.
But the research shows that it is the higher earners who carry most debt, owing £577 more than the average Brit. 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, happy to accumulate debts of over £5,000 before they begin to worry – while those earning below £40,000 grow nervous when their debt nears the £4,000 mark. The point at which they would seek professional help is also far higher amongst the higher earners, at £7,067, compared to £5,213 for the average Brit.
When it comes to men versus women in the borrowing stakes, men are likely to take out larger debts than women. Despite figures showing that they earn 25% more than women, over the last 12 months men have borrowed an average of £2,127, compared to the relatively modest £1,358 taken out by women. Men also appear to be less concerned about their debt: they would not begin to worry until their debt levels hit £3,902, compared to £3,467 for women.
In an effort to repay bills, more than one in five borrowers (22%) say they will have to cut back on daily essentials such as food and petrol. Furthermore, four in ten (39%) are sacrificing luxuries such as holidays this year, in an attempt to balance the books.
When it comes to seeking financial help, most consumers prefer to turn to friends and family (37%), while one in four will opt for an overdraft (23%) or will put money onto plastic(26%) to meet repayments. Worryingly, 7% of borrowers have ended up further into the red in an attempt to clear priority debts.
Table 1: Regional breakdown of debt levels (excluding mortgage and student debt)
|
Region
|
Average debt
|
East Midlands
|
£1,988
| |
East Anglia
|
£1,991
| |
North East
|
£2,021
| |
South East
|
£2,246
| |
South West
|
£2,332
| |
Scotland
|
£2,353
| |
London
|
£2,546
| |
West Midlands
|
£2,632
| |
North West
|
£2,665
| |
Wales
|
£2,688
| |
Yorkshire and the Humber
|
£2,902
|
Michael Ossei, personal finance expert at Uswitch.com, says: “People are running out of ways to fund their ever-increasing household bills, and with salaries failing to deliver, many are being forced to turn to debt just to stay afloat. But it’s easy to borrow just a bit too much and then find yourself in over your head.
“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 7% and pay back £92 a month.
“Balance transfer cards with an interest-free period can also be a good solution for those needing some breathing space, but if you go down this route to manage your debt, it is vital to find the best card for your situation. Have a look at the current deals on the market and try to strike a balance between the interest free period and cost of doing a transfer. The key is finding the cheapest deal that comes with a timeframe you can comfortably work with.”
FOR MORE INFORMATION
Charlotte Nunes
Phone: 020 7148 4664
Email: charlotte.nunes@uswitch.com
Twitter: @uswitchPR
Notes to editors
Research carried out online with One Poll in July 2013 amongst a sample of 2,000 GB adults.
When asked ‘Thinking about your overall debt (excluding mortgage and student loans), how long do you think it will take to pay this debt off?’ 17% said ‘Three years or more’ while 7% said ‘Never, I can’t imagine clearing it at all’. This is 24% of borrowers or 14% of consumers overall (278/2000). Applied to 49 million adults (ONS) this is 7 million consumers.
When asked ‘Thinking about your finances, what is your current level of debt, excluding your mortgage and any student debt? Please think about any outstanding balances on credit cards, money owed to friends and family, purchase plans etc. (In pounds £)’ The average amount was £2,423, this figure rises to £3,385 for 25-34 year olds. For 18-24 year olds this amount is £1,911; for 35-44 year olds it is £3,140; for 45-54 year olds it is £2,703 and for 55+ year olds it is £1,513.
When asked ‘Thinking about your finances, what is your current level of debt, excluding your mortgage and any student debt? Please think about any outstanding balances on credit cards, money owed to friends and family, purchase plans etc. (In pounds £)’ The average amount was £2,423, but this figure rises to £3,000 for those earning between £40,000 and £70,000, while those earning below £40,000 hold £2,663. When asked ‘At what point would the amount of debt you hold start to worry you (excluding mortgage and student debt)?’ The average amount for those earning below £40,000 was £3,915 with this figure rising to £5,185 for people earning between £40,000 and £70,000.
When asked ‘On average how much have you had to borrow in the last year?’ The average amount for women was £1,358 and £2,127 for men. New figures from the CMI show male bonuses double those of women and salaries on average 25% higher - http://www.bbc.co.uk/news/business-23761607 . When asked ‘At what point would the amount of debt you hold start to worry you (excluding mortgage and student debt)?’ The average amount for men was £3,902 and £3,467 for women.
Please refer to Table 1 – regional breakdown of debt
When asked ‘Which of the following have you had to borrow from?’ 37% said ‘A loan from parents or other family members’; 26% said ‘A credit card’; 23% said ‘An overdraft’; 17% said ‘A bank loan’; 16% said ‘A loan from a friend’; 11% said ‘A payday loan’; 8% said ‘Peer-to-peer loan’; 7% said ‘Loan from my children’; 4% said ‘Guarantor loan’.
When asked ‘What level would your debt have to be at before you sought help?’ The average amount was £5,213. This figure rises to £7,067 for those earning between £40,000-£70,000.
Figures released in August show UK economy grew by 0.7% in three months to June - http://www.bbc.co.uk/news/business-23807182
When asked ‘Has your debt level increased in the last year compared to the year before?’ 39% said ‘More’; 31% said ‘Less’ and 31% said ‘The same’.
When asked ‘How do you plan to pay off your debt?’ 22% said ‘Cutting back on essentials (e.g. food and petrol); 39% said ‘Cutting back on non-essentials (e.g. holidays and coffee); 7% said ‘Borrow more money to pay off priority debts’.
Loan is with Zopa - assumed borrowing of £3,000 over 36 months, representative 7.0% APR, monthly repayments of £92.34, total repayable is £3,434.24.
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