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What Is The Average Consumer Debt In The UK

It’s highly likely that you will experience consumer debt at some stage in your life. The most common forms are credit card debt, payday loans, students loans and other consumer finance. According to the money charity, people in the UK owed £1.692 billion at the end of November 2020 which is rising each year. But what is the average consumer debt in the UK and where can you get advice if you need help with your debt?

Table of contents:

    What Is Consumer Debt

    The definition of consumer debt is ‘the amount owed by consumers, as opposed to amounts owed by businesses or governments.’ Therefore, this includes debts that occur as a result of buying goods which do not appreciate in value.

    For example, you can put a coat on a store card, but once you have the coat, it won’t go up in value. It just means you have debt on a store card until you pay it off. Or you can put that ideal holiday on a credit card and have a great time. But once again, it’s debt and money you owe until you pay it off. The holiday won’t go up in value and you have nothing to show for the debt.

    What Are The Different Types Of Debt

    In the UK, there is secured debt and unsecured debt. So what’s the difference?

    Secured

    Secured debt typically involves something that is agreed to be sold in the event of an individual not repaying their loan or overdraft. For example, if you take out a mortgage for your house, your property becomes ‘security’ for the debt. Hence if you can’t repay, your home may be at risk as it could be sold to repay the debt.

    Unsecured

    Unsecured debt does not require anything to be put at risk against the loan. This includes credit cards, store cards, overdrafts and payday loans. For example, if you pay for a holiday using your credit card, then you don’t put anything up as security in order to go.

    What Is The Average Debt Per Household In The UK

    The Money Charity in the UK provides education, information and advice to help people of all ages manage their money. They also produce regular statistics. During the first quarter of 2021, the UK statistics are as follows;

    • The average credit card debt per household is at £1,962
    • Per adult, the total unsecured debt stands at £3,724
    • Meanwhile, the average total debt per UK household is £60,935

    Reasons Why People Get Into Debt

    Now you know the average consumer debt in the UK, it’s important to realise that there are many reasons why people get into debt and why it becomes overwhelming for some people. For example, perhaps you could manage your mortgage repayments perfectly well for several years, but circumstances in your life changed and now you are struggling.

    Even recently, the Covid pandemic may have seriously affected your lifestyle leaving a dramatic effect on your ability to pay off debt. Meanwhile, there are people who build up multiple debts but find it difficult to keep track of who they owe money to. Or they move house and forget to tell creditors, then the debt begins to build up.

    Where Can You Get Help With Debt

    Getting into debt can be overwhelming and stressful, particularly if there are many creditors chasing you for money. But you don’t need to face it alone. If you can see that your debt is getting worse, then the first thing to do is to make a budget and take an honest look at your income and outgoings.

    For example, can you pay off a credit card or store card and then get rid of it altogether? This will prevent the temptation to use it next time.

    Or if you look at your lifestyle, is there anything else you can cut out in order to pay off your debts? Such as a gym or swim membership? Eating out at restaurants or getting regular takeaway? It’s not forever, just long enough for you to clear your debts before they become unmanageable.

    If you don’t know where to start, you can get free advice and support from a number of charities in the UK including;

    • National Debt Advice line
    • The Money Charity
    • StepChange
    • Citizens Advice Bureau

    Other Options For Clearing Debt

    Finally, the average consumer debt in the UK is rising and it takes time to pay off debt, but it’s worth it in the long run.  Not only will it help your mental wellbeing, it will also improve your credit score in case you want to apply for a loan in the future.

    There are several options for clearing debt. You could even start with getting in touch with your creditors to ask for different repayment levels. Perhaps you can afford to pay a small amount back each month, but not the total amount. This is better than nothing. Moreover, it helps to have a clear plan.

    By talking to a debt adviser, they can take an overview of your debts and help you to make a plan. Maybe you can pay half of the total amount in 6 months. Or you could afford to do it within 5 years. By looking at a timeline, you will feel more in control of the situation.

    Alternatively, you might consider a debt repayment order. This is a helpful option if you owe multiple creditors. For example, a debt management company can help you to bring your debts into a single payment each month. Your single payment will go to the company or third party, who will then distribute it among your creditors with their agreement. The benefit is that you won’t have to deal with the creditors yourself or worry about sending money to several people.

    Is Consumer Debt Rising

    Generally speaking, consumer debt is rising in the UK due to a number of factors. The impact of Brexit and Covid will affect the economy for a long time to come. As well as this, there is an 8.6% increase in the average first time buyer house price according to the Money Charity. Meanwhile, private rental prices are also increasing as are gas and other utility bills.

    If you are facing serious debt or financial difficulties, then the important thing is to do something about it as soon as possible before it becomes unmanageable.

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