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Concerns growing about consumer reliance on credit

Concerns growing about consumer reliance on credit

Category: Debt

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

New research from credit provider Sunny shows that 29% of UK adults have already used unsecured credit so far this year, fuelling concerns that many people could find themselves trapped in a cycle of unsustainable debt.

The 29% of respondents who have used credit this year have spent a total of £654, with the most common reasons for turning to credit being the need to pay for essentials (16%), covering emergency expenses (11%) and paying utility bills (7%). However, a further 29% predict that they'll be relying on credit for non-essential purchases at some point this year, including holidays and dining out, totalling an expected £1,356.

The figures also revealed that younger people are more likely to turn to credit, with 40% of 18 to 34 year-olds saying they've already used credit so far this year, compared with 30% of 35 to 54 year-olds, and only 19% of over-55s.

On a more encouraging note, 71% of respondents have no plans to use any form of unsecured credit this year, which suggests that the majority are planning to save in order to cover both everyday expenses and major purchases. For these respondents, holidays are their main savings priority (42%), followed by home renovations (22%) and essential home repairs (19%).

However, even a minority getting into debt is a worrying finding, particularly given that credit use is on the rise. In fact, 2016 has already seen the largest increase in the use of unsecured consumer credit in over a decade – use of consumer credit in January was 9.1% higher than that seen in January 2015 – which suggests that many could end up using more credit this year than they'd planned.

Scott Greever, MD of Sunny, said that the overall results aren't that surprising given the rising cost of living, with additional figures showing that some cities in the UK are now among the most expensive in Europe in terms of day-to-day living costs.

"Additionally, now is the time of year when people start to get on top of their finances and think about larger, non-essential purchases," he added. "Although many plan to save for these longer-term priorities, others, specifically younger adults, will still be relying on credit for major purchases."

The key, then, is to not become too reliant on credit. However, this can sometimes be easier said than done, and if you've already gone too far with it, it's time to be proactive and make some changes before the cycle of debt becomes too unmanageable.

The first thing you'll want to do is take a look at your credit score (heading to Experian Credit Expert would be a great place to start) so you know where you're starting from. After that you may like to look into a 0% balance transfer card if you've maxed out a credit card or two, or even a personal loan if you want a clear timeline to becoming debt-free.

If you're really struggling, you'll want to seek advice from the experts – start by reading our guide to getting debt-free – and you can hopefully change your ways and become less reliant on debt in the future.

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.