According to a report from the National Audit Office, up to 8.3 million people in the UK struggle to pay off their debts and/or household bills. Among an array of circumstances, on the whole, most debt comes about when the cost of living is too high against that of our household income, whether it be employment of benefit entitlements. What’s more, debt comes in many different forms and with the apparent rise in personal debt in the last few years, many people are looking in ways to consolidate their debt problems.
Even for those who do not have any outstanding credit card balances or loans, etc, it is still likely that they will be paying regular bills (a form of debt) and/or rent or a mortgage. The two main forms of debt come under two different headings. The first is Secured debt. Secured debts are usually those payments owed that are associated with an asset, such as a mortgage, for example – which is secured to the property itself. Secured basically means that the provider of the loan, such as a mortgage, can repossess the asset, in this case – the property, should the lender be unable to make payments. The same goes with secured debts attached to cars, etc. The second heading is Unsecured debts. These are debts that are not tied to any assets and usually come with higher interest rates, such as loans and credit card debts for example.
According to UK Finance, the most common forms of debt in the UK are one of each of the above: mortgage repayments and credit card debts. And, according to a survey carried out on 18-24 year olds by YouGov on behalf of a money advisory trust, 37% are already in debt that excludes student loans and mortgages, relying on overdrafts or one or more credit cards.
Getting into debt at a younger age can go one of two ways. Of course, it does give you more time to start catching up once you start earning, but on the other hand, the earlier you are in debt the more difficult it can become to climb out of it and get back on track. Particularly if you become accustom to living a certain way in your late teens and twenties – giving up spending can be just as difficult as keeping track of your debts.
This is why payday loans are so controversial: they are very easily accessible, and many have extraordinarily high interest rates that only make for more debt to pay off. Luckily there are many reputable debt advice organisations too. There have been recent calls on the government to step in more, particularly with advice to younger people about how to better manage finances and where to turn if they have problem debts that they are struggling to pay off.
But, by far, the biggest types of personal debts come down to those who are lucky enough to get onto the property ladder and therefore have mortgage repayments over a long period of time, relying on secure income to manage, and credit card spending. Usually credit card spending will also come down to the cost of living, being used to help with shopping bills, energy bill payments, mobile phones, and the occasional holiday. When you are able to manage the minimum repayments owed, credit cards can be a very useful tool. It is only when the debt stacks up, you have a change in circumstance, or the debt is just too high to manage that people run in to problems.
However, those who do find themselves struggling should be better aware that there is help available. Having money worries is one of the biggest causes of stress and anxiety amongst people of working age. If you are struggling with debt, you should speak to an advisory service that can offer understanding, support and advice.