The Office for National Statistics has recently released figures which show that unsecured debt is increasing in the UK. (Unsecured debt is typically credit card spending, loans not linked to property or cars, and student debt).
Debts including credit cards and personal loans rose 11% to 119bn in the past two years leading up to March 2018. The survey is published every two years.
The report stated average household financial debt rose 9% to £9,400.00.
However, much of the increase is as a result of higher student loan and Higher Purchase (HP) debt.
It is true to say the figures are skewed by the £32bn of student debt, the bulk of which will never be paid back in full. Student debt is also different to normal unsecured debt and is taken automatically from the wages of the ex students when they start earning a salary above a certain level. In this respect it can be seen as more of a tax than a debt.
However, even excluding student debt UK households are still maintaining £87bn in loans, credit card debt and HP agreements. There is overdraft debt for bank accounts and there are also overdrafts which would be deemed unsecured debt.
Median financial debt, which takes the middle household as the norm, rather than dividing total debt by the number of households, grew by 12% to £4,500.00. This figure however, excludes households with no debt and suggests these debts are not evenly spread.
At one end of the spectrum the poorest 10% of households have debts three times bigger than the value of the assets they own. At the other end of the spectrum the top 10% have total wealth (property, pensions and other assets), worth 35 times more than their debt.
Debt needs to be kept under control if at all possible. Credit card bills and overdrafts etc. can quickly spiral out of control to the point where they become unmanageable and an individual becomes insolvent.
If an individual sees borrowing and debt as a burden, rather than a means to facilitate home improvements or a one off purchase for example, then it is worth taking steps to deal with the debts and get the appropriate insolvency advice.
Quite often money management and tightening up of budgeting can get an individual out of a ‘debt spiral’ but often the debts are out of control and at that point the debtor needs to seek good, independent debt advice to look at the best way forward.
For expert, confidential debt advice about any of the matters raised in this blog, please call 0845 287 0939 or send your enquiry via our online contact form.