Britain’s overindebted in denial

Nearly four million Britons are officially overindebted but two-thirds of them are in denial according to research from leading debt management specialist Chiltern.

Its research revealed that one in 16 people in the UK spends more than 25 per cent of their wages paying off unsecured debts each month – the level at which Government guidelines say people are overindebted – but only one in 45 people questioned admitted their finances were seriously overstretched.

By age, the 35 to 44 age group are the most overindebted and across the country East Anglians are the most likely to be deluded about their finances.

Less than one in 100 East Anglians say their finances are seriously overstretched but one in nine pays more than a quarter of their income to service unsecured debts – the highest number anywhere in the country.

In contrast, Lancastrians and people in Wales are the most realistic about their finances with a much smaller difference between the number of people who say they are overstretched and the number who are officially overindebted.

Overall, men are slightly more likely than women to be overindebted but also keener to admit it, which suggests women have a greater tendency to be in denial about their finances.

Chiltern’s Joanne Gill says: “There are lots of people who are officially overindebted, but two-thirds of them don’t think they have a problem.

“Unfortunately debts don’t go away, they need to be repaid and ignoring them will just make the situation worse.

“Anyone who is paying a quarter of their income to service unsecured debts should get help to put those repayments on a sustainable footing before the situation gets worse.

One in 16 people (6.4 per cent) in UK said more than a quarter of their income is taken up by loan and card repayments - 6.8 percent of men against 6 per cent of women.

Only 2.2 per cent of UK residents admitted their household finances were seriously overstretched. 2.5 per cent of men compared to 2 per cent women

One in nine 35-44 year olds (10.9 per cent) say they are paying more than a quarter of their monthly income to service credit and loan repayments, compared to 3.2 per cent of pensioners (over 65 year olds) and 3.4 per cent of 18-24 year olds.

In East Anglia just one in 143 people (0.7 per cent) consider themselves to be seriously overstretched, yet the highest number anywhere in the country one in nine (11.8 per cent), is paying more than a quarter of their wages to service their unsecured debt.

In Lancashire and Wales one in 24 (4.1 per cent) and one in 26 (3.9 per cent) of people consider themselves seriously overstretched and one in 19 (5.2 per cent) and one in 21 (4.7 per cent) respectively are paying more than 25 per cent of their income to pay their unsecured debts.

Chiltern Debt Management provides an informal solution to help people manage their debts. This involves working with the customer to produce a budget detailing income and necessary expenditure, like housing, food, clothes, bills and transport.

The money left over, once living costs have been accounted for, is known as the disposable income. This is shared proportionately between the customer’s creditors until the client becomes debt free or a change in circumstances means they are able to resume contractual payments to the creditors.