Brits are badly in debt - and millions are panicking

Four in ten Brits say they're worried about their debts, with a third saying they're juggling three or more credit cards.

Bank of England figures show total unsecured debt on credit cards, car loans and overdrafts is now £198 billion – the highest level since the 2008 financial crisis.

And a survey from financial services analysts Consumer Intelligence shows just what this means for families.

Nearly one in six adults rely on credit cards to get through the month, it found, and one in ten are maxed out on at least one card. One in five owe more than £10,000 on top of any mortgage.

One in ten people say they're extremely worried.

"The alarm bells have been ringing all year with the Bank of England warning that personal debt levels have been rising at the fastest rate since 2005," says Ian Hughes, chief executive of Consumer Intelligence.

"It is a major concern when millions of people admit to being worried about how much they owe and so many are relying on credit cards to tide them over each month."

See also: The people who spend more on debts than food

See also: Could you spot debt problems in friends and family?

Debt problems affect higher earners just as much, the study found - around a quarter of adults with a household income of more than £50,000 don't usually clear their credit cards.

Around the UK, the most stressed areas are Northern Ireland and the North East, where most people are worried about their debts. The least worried areas are the East and the South West.

"Borrowing makes sense for many when interest rates are low but it is essential people have a plan to repay their debts, not least to reduce the stress millions are facing," says Hughes.

Percentage of people very worried/quite worried about debt
Northern Ireland: 17%/50%
South East: 15%/27%
East Midlands: 13%/27%
London: 13%/35%
Scotland: 11%/37%
South West: 11%/25%
North West: 10%/37%
West Midlands: 10%/26%
North East: 10%/50%
Wales: 10%/33%
Eastern: 7%/22%
Yorkshire & Humberside: 7%/35%
UK: 11%/31%

Most common causes of debt
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Most common causes of debt

There are some very common reasons for building up problem debts. Here we reveal seven of the most common, and what you can do if you face them.

Unemployment or illness that means one or more of the household’s earners are unable to work will bring a profound change in family finances, and according to the Money Advice Service is the most common reason for getting into problem debt.

If your circumstances change, therefore, you need to immediately address your family finances, and put everything on a minimum spend lockdown. You should also look into the benefits and tax credits that are available sooner rather than later, to try to close the gap.

If you are on the kind of contract that means varying hours, it can be incredibly difficult to work out what you can afford to spend - making it the second most common reason for getting into debt - according to the Debt Support Trust.

Rather than swinging through the extremes from week to week, the best approach is to establish a budget that will work in the leanest of months, so you don't find yourself getting used to the months when you work more hours.

According to Citizens Advice, trying to service too much debt is the third most common reason for getting into difficulties. The TUC found that those with problem debts spend 40% of their income on debt repayments.

If you are in this position, you officially need some help with your debt problems. If you continue to rob Peter to pay Paul, you will end up owing more and more, so you need to take stock and talk to a debt charity about all your options.

The double-whammy of the legal bills combined with the incredible cost of establishing two separate households is enough to make divorce or separation the fourth most common reason for going into debt - according to the Debt Support Trust.

There's no easy solution, but if you are going through this, it can be helpful to talk through your financial situation with someone you trust or a debt charity, who can help you balance a stretched budget.

Problem debts aren’t necessarily caused by a sudden shock to the system. According to the Money Advice Service, 20% of their clients are simply trying to live on an unsustainably low income.

If you are in this category, it’s important to seek help on the benefits and tax credits you may be able to receive. It’s not always easy to navigate the system, but charities like StepChange have experts on the benefits system who can talk you through what’s available.

The combination of rising costs and stagnating wages over the last few years has meant increasingly people saw their monthly wage cover less and less of their monthly outgoings. This position has started to ease more recently, but has left many people far worse off than before the financial crisis. The Money Advice Trust said a combination of this and unexpected costs was responsible for almost one in ten problem debts.

If you consistently spend more than you are expecting, it's well worth keeping a spending diary. That way you can establish the real cost of living, and start to identify where you can cut costs.

The Money Advice Service says it commonly deals with individuals who have struggled to get to grips with budgeting and debts, and have got into debt because they don’t have the skills and knowledge to manage their money effectively.


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