Average adult has £3,249 in unsecured debts
Brits estimate that they currently owe an average of £3,249 in personal loans, car finance, unpaid credit and store cards and overdrafts.
The survey of 2,000 UK adults, commissioned by Gocompare.com into the amount of debt people hold (excluding mortgages or student loans) revealed that:
the average debt is £3,249
48% owe more than £500
just under a quarter (24%) owe between £501 and £10,000
Almost one in ten (9%) have borrowed in excess of £10,000
Generally men carry larger debts than women, owing on average £3,493 compared with £3,019. Those in the 45 to 54 group admit to owing the most - with an average debt of £4,265 while people aged over 65 had the lowest amount of average debt (£1,843).
The study also found a large regional variation in the amount of debt held. People living in Yorkshire and The Humber owe the most (on average £3,838) while those living in the East have the lowest average debt of £2,204.
Rank – Region - Amount Owed
1 Yorkshire and The Humber £3,838
2 London £3,820
3 South East £3,760
4 East Midlands £3,414
5 North West £3,324
6 West Midlands £3,270
7 Scotland £3,119
8 North East £3,118
9 Wales £2,721
10 South West £2,511
11 East £2,204
Matt Sanders, Gocompare.com’s banking and credit card expert, commented: “Debt used carefully can be a useful part of your financial planning, helping to spread the cost of major purchases. And, if you settle your bill at the end of each month, credit cards give you access to interest free, short-term, flexible borrowing and provide you with extra protection on the goods you buy.
“But overspending on credit cards is a common way people get into debt. That coupled with only making the minimum repayment, means that many people end up increasing their debt. Card issuers add interest to any outstanding balance, unless you have an interest free period for purchases or balance transfers, so the longer you take to repay the debt, the more money you will owe. For example, it could take up to 30 years to clear a debt of £3,250 if you only make the minimum repayment each month.
Matt Sanders continued: “If you have outstanding credit card debt, an effective way to reduce the amount you owe is to review the interest you are paying and see if you can switch to a better deal. Currently, there are a number of competitive deals on the market with introductory interest free periods on both balance transfers and purchases - some giving you the equivalent of a 28 month interest free loan. While these usually charge a small balance transfer fee of around two to three per cent, they are worth switching to if you can get over two years of interest free repayments. Zero per cent offers tend to be for a limited time period, so you should shop around for the best deals ahead of the offer expiry date.
“However, if you are unlikely to repay a significant part of your debt during the interest free period, you should consider switching to a card with a low interest rate for the lifetime of the balance transferred. This will immediately reduce the interest rate until the debt is paid off.”