Certain borrowers are finding themselves stuck in a downward debt spiral according to price comparison site uSwitch.com.
The firm says its 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. 7% of borrowers – some four million consumers – believe that they will never be debt-free.
39% say their debt has increased in the last 12 months, with the average person currently £2,423 in debt. 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 Briton. 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.
Meanwhile, 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, 22% say they will have to cut back on daily essentials such as food and petrol. Furthermore, 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 23% will opt for an overdraft or will put money onto plastic (26%) to meet repayments. 7% of borrowers have ended up further into the red in an attempt to clear priority debts.
Michael Ossei, personal finance spokesperson at uSwitch.com, said: “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.”