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Brits’ debt rockets 41% in just a year

30th January 2015 Print

British debt appears to be spiralling out of control, according to research from MoneySuperMarket. Consumers now owe an incredible £196 billion collectively, increasing by a staggering 41 per cent from last year, whilst those aged 18 to 34 have seen their debts almost double in the same period.

With two thirds (66 per cent) of UK adults admitting they currently have some form of unsecured borrowing, the comparison site found people are racking up even more debt than last year, when the amount borrowed came to £139 billion or £4,412 on average each. Now the average amount people owe on unsecured credit is £5,898 each, a 34 per cent increase since last year, either on a credit card, personal loan, overdraft, store card or finance agreement.

Half (50 per cent) of Brits owe money on a credit card, while a quarter (23 per cent) are in debt through their overdraft and 12 per cent have taken out a personal loan.

Debt doubles for under 35 year olds

The research shows the younger generation aged 18 to 34 have seen their debts almost double within a year from £5,446 to an astonishing £10,058 on average – an 85 per cent increase. Meanwhile 35 to 54 year olds owe £5,211 (an increase from £4,298 in 2014). Those aged over 55 years are the only age group to see their debt decrease within the past year – from £3,107 to £2,528 on average each.

Men have also relied more on credit than women in the last 12 months, and currently owe £7,509, whereas women owe £4,139. Last year, the average individual amount owed by each gender was £4,821 and £3,899 respectively.

Consumer spending is clearly on the rise, as almost half (47 per cent) of those in debt owe more money than they did last year. A fifth (21 per cent) of these did not owe any money last year but now have debts of £1,015 on average. Forty-five per cent owe the same or less than they did last year.

Dan Plant, consumer expert at MoneySuperMarket said: “This research begs the question whether the economic recovery being celebrated by politicians is simply based on a rapidly climbing debt time-bomb.

“Not only are personal debts up by 40 per cent across the board - with under 35s worryingly seeing what they owe more than double in just a year – they are being paid off more slowly than a year ago. This suggests the British public may be robbing Peter to pay Paul, with the increased consumer spending we’ve witnessed just a by-product of this – which would be hard to sustain. It was borrowing at excessive levels that was one of the contributing factors to the economic crisis so we must hope we aren’t witnessing a repeat of mistakes of the past.”

Only 36 per cent of borrowers think they will pay off their debts within a month, with a further 24 per cent expecting it to be cleared within a year.However, 14 per cent of borrowers think they will be saddled with the debt for two to five years, slightly up on the 13 per cent who felt that way last year.

Dan Plant continued: “The crucial question anyone with outstanding debts should ask themselves is “am I paying the lowest interest rate possible?” The lower the rate, the faster you will repay what you owe – even if you can’t afford to increase your monthly repayment.

It may be better to consolidate multiple debts onto a cheaper form of credit, such as credit card that charges zero per cent on balance transfers, or opt for a low rate credit card if you think it will take longer to pay your debt off. Alternatively a low-rate loan could be a viable option.

“Work out how much you can realistically pay off each month, whether you can make any spending cutbacks, and stick to your plan – then it’ll be much easier to get back to black.”