17th April 2015
The International Monetary Fund (IMF) has warned Britain’s household debt is putting the economy in danger but 44% more people will still take on debt this year.
Research by MoneySuperMarket shows that more than four in 10 people will take on debt this year than last year and two-fifth of UK adults in debt are relying on unsecured credit in order to pay their day-to-day living expenses.
The findings of the research come just days after the IMF said British households’ reliance on loans and credit cards has put the last five years of recovery in jeopardy.
MoneySuperMarket found that of the 33 million adults – or 66% of the adult population – with existing unsecured borrowing, such as credit cards, overdraft or loans, a quarter will have to take on more debt to cope this year.
Those aged 18-to-34 are particularly vulnerable, with 58% expecting to use credit to cover their costs this year.
Of those in debt, 15% said they will try not to use anymore unsecured credit but may have no other choice if they face an unexpected cost.
A total of 14% said they find it difficult to live within their means and will need to fund the shortfall with credit – this figure doubles to 28% for those aged 18-to-34.
For nearly one in 10, credit will be used to cover essential monthly outgoings.
Kevin Mountford, head of banking at MoneySuperMarket, said: ‘While inflation is at an all-time low, and UK debt is expected to fall next year, there is still a long way to go before many consumers are out of trouble.
‘It’s important that those relying on credit keep in control of the situation, so their debt doesn’t spiral out of control. Simply working out a realistic monthly budget and cutting out unnecessary expenditure should be the first step.’
He added that consolidating outstanding debts onto a 0% credit card will cut extra costs as long as they can pay the balance in time.
It is not all doom and gloom though, a third of people pay what they can each month and try and clear their credit cards and overdrafts as quickly as possible. A fifth a making a monthly budget and sticking to it and a further 19% have set up a standing order to pay owed money automatically.