Paying off debt should be at the forefront of any financial plan, as there's nothing worse than seeing all that interest mount up. However, some people find that they're so entrenched that they spend a large proportion of their income simply making minimum repayments, and that's a recipe for disaster. So, just how much do you spend on debt?
Unfortunately, some people spend so much that they could find it difficult to make ends meet elsewhere. Research from Debt Advisory Centre (DAC) found that 65% of respondents had some form of unsecured borrowing (such as credit cards, personal loans, store cards or overdrafts), and 7% of those spend a whopping 50% or more of their take-home earnings on repayments each month.
Happily this is just the minority, with the average borrower spending around 20% of their earnings on debt repayments. However, it's still cause for concern, particularly with a much larger figure (34%) spending between 21% and 49% of their income on repayment commitments, something that could take a serious toll on their finances.
While some people may be able to comfortably sustain this kind of financial arrangement, others will find it incredibly tough. Ian Williams, of DAC, commented: "Clearly circumstances differ, and a young person with no dependants and living at home may be able to sustain a higher proportion of their income going towards their unsecured borrowing.
"However, it is alarming to find that for 41% of borrowers their monthly commitments are 21% or more of their pay, and very concerning to find that for 7% of borrowers their repayments account for over half their income. Whatever their circumstances, this is unlikely to be sustainable for very long."
If your debt repayments are getting too much, it's time to take action. Even spending only a small proportion of your income on repayments is probably more than you'd like, but there are things you can do to get back in control.
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