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7% of adults spend more than 50% of earnings on unsecured debts

14th January 2015 Print

1 in 15 (7%) people who have unsecured borrowings are spending 50% or more of their take-home earnings on payments each month, according to research conducted on behalf of debt advice and solutions provider Debt Advisory Centre (DAC).

The research found that 65% of UK adults have unsecured borrowing – such as credit cards, personal loans, overdrafts, catalogue credit, store cards and payday loans. On average, borrowers spend around 20% of their take home pay on debt repayments each month.

More worryingly, a third of borrowers (34%) say that their repayments account for between 21% and 49% of their take home pay. And for a further 7% of borrowers their monthly repayment commitments account to more than 50% of take home pay.

People aged 25-34 were most likely to spend 50% or more of their take-home earnings on their unsecured repayments, with 11% admitting to doing so. Conversely 71% of people over 55 say that their repayments account for less than 20% of their income (compared to the average of 59%) – although the proportion of this age group who pay over 50% is also 7% (the same as the UK average).

The figures showed some wide regional variations. In the North East, 1 in 8 borrowers (12%) admitted that their repayments accounted for more than 50% of their take home pay, close to double the national average.

By contrast, three quarters (76%) of borrowers living in Northern Ireland say that their repayments account for 20% or less of their income, compared to 59% nationally.

Ian Williams, spokesman for DAC, says: “Clearly circumstances differ and a young person with no dependants and living at home may be able to sustain a higher proportion of their income going towards their unsecured borrowing.

“However, it is alarming to find that for 41% of borrowers their monthly commitments are 21% or more of their pay, and very concerning to find that for 7% of borrowers their repayments account for over half their income. Whatever their circumstances this is unlikely to be sustainable for very long.

”It is likely that many of these people can only survive by cutting back on essentials – perhaps switching off the heating, skipping meals or even getting behind with rent or mortgage payments. It’s really important to remember that – however high they are- unsecured debt repayments should be treated as less of a priority than key bills such as utilities, food and housing.”