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Debt problems hit record high

Debt problems hit record high

Category: Debt

Updated: 08/09/2016
First Published: 08/09/2016

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 It is now over 6 months old so the content may be out of date.

Do you struggle with debt? You're definitely not alone. It seems that debt troubles are becoming increasingly prevalent, and in fact, research from StepChange Debt Charity shows that the number of people seeking help with debt problems has already hit a record high in 2016.

The figures reveal that over 300,000 people sought advice from the charity between January and June this year, the highest half-year figure ever seen, with those individuals struggling with an average of £13,826 each in unmanageable debt – adding up to £2.4bn between them.

Credit cards, overdrafts and personal loans were the most common source of debt problems, with 67% of clients reporting an average of £8,078 outstanding on plastic, while 53% had unpaid overdrafts (averaging £1,679) and 44% had personal loans (£8,657).

However, these were not the only issues people have difficulties with. A particularly worrying finding was the fact that two in every five people who contacted the charity owed money on essential bills (such as rent/mortgage, utilities and Council Tax), unchanged from a year ago, while 29% don't have enough money to cover their essential bills and credit commitments each month.

Overall, the average StepChange Debt Charity client has just £58 left over to put towards repaying debts after all their monthly outgoings are accounted for, and considering the average debt is pushing £14,000, that small contribution will barely make a dent.

Work not necessarily a safeguard

The figures went on to reveal that those affected are increasingly likely to be younger, working part-time and renting their home – in other words, those least able to comfortably rectify the situation.

Even those in work can find it difficult to stay afloat. Indeed, more StepChange clients were found to be in work than at any point since 2011, but they're increasingly in part-time work and less likely to be in full-time employment. Around 19% are now part-time workers, up from 16% in 2011, almost mirroring the fall in the number of clients who are in full-time work (down from 34% to 30% over the same period).

There's also been a sharp rise in the proportion of people in debt who rent their home, with amounts owed also rising rapidly: 77% of clients are now renters (up from 55% in 2011) and 24% are in arrears, up from 15% in 2011. The average rent arrear now stands at £954, up from £769 in 2011, an increase of 24%. Meanwhile, the average age of people approaching the charity has fallen in the last five years, with 59% of the charity's clients now under 40, up from 51% in 2015.

Slightly better news was in the finding that the number of households in arrears on bills like rent, utilities and Council Tax has now stabilised after years of substantial increases – but the fact that so many people still can't meet essential outgoings is a definite concern.

"These figures paint a worrying picture of the reality of problem debt across the UK," said Mike O'Connor, chief executive of StepChange Debt Charity. "It's bad for your health, your relationships and the economy. Debt is a serious issue for people who are working as well as for those who are not, [and] the Government needs to take the issue of personal debt seriously."

He called for the Government to take action to help people stuck in problem debt, such as giving "breathing space" to those seeking debt advice, whereby interest and charges would be frozen and enforcement action halted while the individual tried to find a solution and get back on their feet.

However, such an initiative may take a while to come to fruition, so if you're struggling with debt, don't stick your head in the sand. It's important to do everything you can to tackle things before it all gets too much – start by reading our steps to get debt free, speak to your creditors to see if there's anything they can do, and remember to seek independent advice; you don't have to go it alone.

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.