5 million families face debt problems


Hanging file folder labeled with DebtsNew research has shown that millions of UK families have debt problems, with 1.6 million suffering from extreme debt.

The report, called ‘Britain in the red’ and published by the TUC and Unison, found that between 2012 and 2015 the total amount of unsecured borrowing in the UK, which excludes mortgages, rose by £48 billion to a staggering £353 billion.

Families are divided into two groups:

‘Problem debt’: This accounts for 3.2 million, equivalent to 1 in 8, households in the UK. It is defined as paying out more than 25% of their gross household income on unsecured debt repayments

‘Extreme problem debt’: This accounts for 1.6 million households and is defined as paying out more than 40% of their gross household income on unsecured debt repayments. 1.2 million of these households have income of less than £30,000 per year, making their problem particularly acute.

Mounting debt

The problem is getting worse, with the number of low income households, in employment, which are facing extreme debt, nearly doubling from 5% to 9% over the past year. The report also identified a trend of debts being generally small in nature, often to payday lenders, utility providers and landlords.

The report also identifies the main reason for the increase in debt problems as a decrease in real wages of 10.4% since the financial crisis.

Responding to the report, TUC General Secretary Frances O’Grady said: “Families can’t continue relying on credit cards and loans to get by. But with the average weekly wage still worth £40 less than before the 2008 crash, lots of families have little choice.”

“The government must also do more to help low-income families struggling with problem debt in getting access to debt restructuring and insolvency support.” (Source: TUC)

Adding his comments, Peter Tutton, Head of Policy at StepChange Debt Charity, said:

“Every week we see thousands of households struggling to keep up with their essential bills and credit repayments. Sluggish wage growth and the rise in insecure jobs have left households even more financially vulnerable. When budgets are stretched to the limit, even a small income shock can push people into serious financial difficulty.”

“Too many households are relying on credit to get by and this massively increases their chances of falling into severe problem debt. The Government could act quickly to give better options to hard-pressed households by completing its overdue review for a ‘breathing space’ scheme. Such a scheme would help people regain control of their finances and stop temporary setbacks turning into long term, devastating debt problems.” (Source: Step Change)

Are you in debt?

If you are struggling with debt, the first step is to stop making the problem worse by taking on additional borrowing. We would then recommend seeking professional help by contacting Step Change a charity set up to help people manage their debt problems. Unlike many other organisations Step Change will not charge you for their advice, help and support, leaving your more money to repay your debt.

You can visit their website by clicking here.