Fifth of Brits owe money for things they no longer own
A fifth of people in the UK - equivalent to 12.6 million adults across the country - still owe money for something that they no longer own.
According to the survey conducted on behalf of debt advice and solutions provider Debt Advisory Centre, one in five (20%) respondents revealed they have active credit agreements they are still paying off, despite no longer owning the item at the centre of the contract. The most common agreement to still be in place after the owner had parted with the product was a mobile phone contract.
Credit agreement - % of customers still paying for it
Mobile phone contract 48%
Car finance arrangement 45%
Credit agreement for furniture 27%
Credit agreement for tech product 24%
Finance agreement for home improvements 14%
Of the respondents who have an active mobile phone contract in place despite no longer owning the mobile phone, half (48%) upgraded their phone before they finished paying off their old one. A further third (37%) admitted that the item broke before they had completed their repayments, and one in 10 (12%) said their phone had simply outlived its usefulness so they replaced it.
A similar pattern was noted among people still paying off a car finance agreement even though they no longer owned the car. More than half (57%) said they had upgraded their vehicle but were still paying for their old one, while one in four (26%) revealed they had purchased a new car after their old one broke down.
Depending on the credit agreement, selling the product at the centre of it can be difficult. Hire purchase and conditional sale finance agreements usually dictate that the product, such as a car or furniture, remains the lender’s until the last payment has been made in full. Selling it without the lender’s permission could be a criminal offence, so it is important to check the small print of the agreement before taking action.
A popular reason to take out a credit agreement was in order to fund home improvements. However, two-fifths (41%) of respondents with a credit agreement for furniture they were still paying off said they had already replaced the furniture with something better. A further quarter (24%) said they had replaced it after it wore out. Meanwhile, one in 10 (13%) respondents with a finance agreement for home improvements they no longer owned said they had sold the products they were still paying for.
Ian Williams, spokesman for Debt Advisory Centre, says: “When money is already tight, it’s worrying that one in five people are still paying off items they don’t even own anymore. Not only can this add more pressure to finances that are already stretched, but it might also affect their credit score – especially if they start to miss payments.
“These findings prove why it’s so important to carefully consider whether an item is really needed and how useful it will be before taking out a credit agreement to fund it.”