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Millions are borrowing to buy essentials

Millions are borrowing to buy essentials

Category: Debt

Updated: 15/12/2016
First Published: 15/12/2016

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 It is now over 6 months old so the content may be out of date.

Many of us use credit from time to time, and when used wisely, it can be a valuable way to help make the most of your money, particularly with things like cashback credit cards and 0% interest deals. However, over-reliance on credit can be dangerous, and it becomes even more worrying when people are forced to borrow to buy essentials.

Credit crisis

Research from Debt Advisory Centre shows that some 7 million people have borrowed money to pay for food, while another 4.5 million have had to borrow to pay their rent or mortgage, highlighting the serious financial squeeze that many households are facing.

Within that, young people appear to be the hardest hit: half of those who have borrowed money for food are under the age of 34, compared with just 6% of those aged 55+. Similarly, of those who have borrowed to pay for housing, one in three are aged 18-34, compared with just one in 50 of those aged 55+.

"Buying food and paying for the roof over your head are priority costs, and it is quite alarming that many have to use credit to pay for these essential bills," said debt expert Melanie Taylor of Debt Advisory Centre. "Borrowing for essentials is a sure sign that your finances are overstretched."

Budget overload

This may not only be impacting the unemployed or those less well-off, either, with similar research from The Money Platform finding that 49% of employed respondents regularly exceed their monthly budget, which could in itself lead to dipping into credit. Even high earners can struggle to make ends meet, with 40% of those on over £51,000 per year exceeding their monthly budget on a regular basis.

As a result, one in three respondents admit that they regularly rely on credit cards and overdrafts to balance the books, and if not used wisely, that kind of credit use can quickly spiral into debt. This could be compounded by the fact that 26% of those in full-time employment have no money put aside for emergencies, which could lead to an even bigger credit card hit should the unexpected arise.

"The research highlights the real money struggles of the British public," said Charles Balcombe of The Money Platform, with many "falling behind on their payments and turn[ing] to the banks, overdrafts, family members and payday loans to support them." This could have long-term consequences, as once you're in the cycle of debt, it can often be difficult to get out.

Melanie Taylor has this advice: "Review your finances and try to cut back where possible. If that isn't possible, it makes sense to seek debt advice sooner rather than later; if you start to miss repayments then interest and charges can quickly build up."

What next?

If you're worried about repayments, speak to your creditors to see if there's anything they can do, or seek independent advice (such as from Debt Advisory Centre) for additional support. You may also want to read our guide on steps to get debt-free, which could help ease your mind and give you a plan of action.

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.

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