Personal debt puts Britons under pressure

Due to credit card, loan and overdraft debts, it’s estimated that forty per cent of Britons aged 26-40 could not survive for more than one month if they lost their job, according to a new study by credit reference agency Equifax.

The study also found that around thirty per cent of this age group had short-term debts of £5,000 or more. The study comes at a time when lenders have come under increasing pressure from consumer groups and politicians regarding their contribution to the UK’s growing personal debt problem.

Equifax believe that the study shows evidence of debt dependency among UK consumers with one in five of this age group admitting to using their overdraft every month.

“ There is no getting away from the fact that the greater dependency on credit does seem to have put a reasonable proportion of consumers under financial pressure,” said Neil Munroe, MyEquifax.co.uk external affairs director.

“ There is enormous public pressure to ensure that consumers are managing their finances effectively, and not being drawn into bad debt. And what this research seems to indicate is that whilst many consumers use credit and short-term loans extensively, they have s pretty good understanding of what constitutes a bad debt and how it could impact their future,” he added.

Equifax also found that outside this age group the financial pressures of education and early adulthood were noticeably evident among 18-25 year olds.

Among this young age group, 40 per cent said that they use their credit cards for everyday living expenses and worryingly 13 per cent admitted that credit card payments accounted for more than half their monthly earnings, leaving them with little disposable income after other costs.

However, credit is not solely the domain of the young with older Britons (aged 51 – 70) found to be still taking out credit cards and personal loans. This age group, however, were found to be better organised with more than three quarters paying their regular bills through direct debit.

In the 51 –70 age band, one in three were found to pay their credit cards each month on receipt of the first bill, the highest proportion of any age group.

The study found that even this age group uses credit cards and overdrafts regularly, with 31 per cent saying that they have debts of more than £5,000 and 32 per cent holding four or five credit cards.

29/5/05