With the rising cost of living, from paying the mortgage and energy bills to putting food on the family's table, it seems debts are getting pushed down the priority list - something that could be costly in the long run.
According to research from The Money Charity, the overall outstanding balance from unsecured lending reached its highest level in two years in January, standing at £160 billion. This means, on average, typical household debt amounted to £54,476 including mortgages and £6,087 when not taking mortgage costs into account.
The trend over the past three years has been that outstanding balances have actually fallen in January, compared to the December before, but that was not the case this year.
Sharp increases have been seen in the amount of money people owe to unsecured loans, such as credit cards, bank account overdrafts, personal and payday loans.
It seems budgets are getting out of control and consumers are not tackling debt head on. It's as simple as working out all your outgoings and totalling them up and then doing the same for your income. If your outgoings exceed your income then you will need to be brutal and rein in your spending; you may find there are cuts you can make to non-essential expenditure to get yourself back on track.
If you have lots of different debts, including credit cards, an overdraft or store cards, then you may want to consider consolidating them all on to a long 0% balance transfer credit card, to give yourself a chance to get on top of them all again.
Michelle Highman of The Money Charity possibly attributes the increase in loans to mounting financial pressures, including escalating debt and rising food and transport costs compared to slow income growth.
"Consumers may be finding that once they have paid their priority debts and covered basic living costs they don't have the additional funds to pay their unsecured loans; and as a result continue to incur high interest costs", she said.
This isn't the only catch 22 situation people are finding themselves in, with many having difficulty getting out of the red when it comes to their bank accounts too, due to unforeseen bank charges.
In a study by thinkmoney.co.uk it has been revealed that out of the 28.6% of people who paid bank charges last year, over half (55.9%) ended up in an unauthorised overdraft as a result.
Some of the most common reasons for these charges are missed direct debits, unpaid standing orders and bounced cheques, a situation which is then further exacerbated by having to pay a penalty. In fact, the average number of penalties paid by each customer was three, with them typically being charged between £31 and £40, and nearly 17% claimed they had paid over £100.
Ian Williams of thinkmoney said: "Not having enough money to pay a direct debit or a standing order is enough of a worry, but when customers are charged by their bank or building society as well, it can put an even greater strain on the household finances.
"Being pushed into an unauthorised overdraft is also a concern. Because many financial service providers charge customers for each day they are in an informal overdraft, their finances could be pushed even further into the red."
If you find yourself caught in this cycle, then you need to have a chat with your bank as you may be able to set up a pre-agreed authorised overdraft, so you don't receive unwanted charges again. However, if you keep going into your overdraft and are spending most of your time in the red, you will need to think about what you can do to cut your spending.
Take a look at our guide to getting (and staying) overdraft free and you could be on the other side of the problem in no time, perhaps even looking for a savings account to set aside that extra pound to make you feel more financially secure.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.