16th October 2014
Well over half of young Britons are turning to the likes of payday lenders in a bid to make ends meet shows new research.
Charity group Citizens Advice claims that clients aged 17-24 make up 10% of all of the charity’s serious debt cases and more than 15% of its debt cases have been caused by taking out a high-cost loan.
In fact payday loans, such as those offered by Wonga, accounted for 62% of the high-interest credit used by under-25s.
The new figures are part of an in-depth analysis of nearly 30,000 of the most serious debt problems experienced by Citizens Advice clients, 3,000 of which were debts held by people aged between 17 and 24.
The charity reveals that even young people who are employed can get into serious financial trouble, with more than one in three severe debt clients aged under-25 being in work.
Less well-known types of high-interest credit, such as guarantor loans and logbook loans are also a cause of people falling into debt. Guarantor loans are those in which another individual is listed as being liable for repayments if the borrower cannot make payments.
Citizens Advice has also forecast that the number of logbook loans, where people use their car as a security to get a loan, is set to rise by 61% this year.
Data released by the charity today show that, of Citizens Advice clients in serious debt, 10% are aged between 17 and 24, of which:
Citizens Advice chief executive, Gillian Guy, said: “Generation Y is fast becoming Generation Credit. The housing and money pressures on young adults are significant and it is a big concern that one in three young adults in serious debt is employed.
“It is a big concern that so many young adults are turning to some of the most expensive types of loan to get by. Taking out a payday loan in your late teens or early twenties can have significant and damaging consequences for later life. Often, high-interest loans end up spiralling out of control and many people in debt end up feeling they have nowhere else to turn other than a vicious circle of more borrowing.”
The crisis in youth unemployment has been one of the major features of the recession of recent years, with around one million under 25s out of work or education said Citizens Advice. While this number has fallen, more than 700,000 young people still remain frozen out of the economic recovery.
Of those young people able to find a home of their own, many struggle to keep up with their rent, with Citizens Advice dealing with a 57% increase in homelessness problems for under-25s from the start of recession to 2013.