Debt fears for poorer households

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Credit cards can charge interest of 20% a year

A third of the lowest-income households in Britain have loans along with credit card debts in which outstrip the assets they hold, research has found.

This specific debt can become a problem to repay, even if the total amount borrowed will be relatively low.

The Institute for Fiscal Studies (IFS) analysed official figures to estimate the extent of unmanageable debt.

Unsecured borrowing, such as loans, overdrafts along with credit cards, has been rising by nearly 10% a year inside UK.

The IFS found in which a quarter of very low-income households have high debt repayments or are behind on bills or repayments.

Helen Barnard, by the Joseph Rowntree Foundation, which commissioned the report, said: “The government, regulators along with lenders need to not only look at increasing access to affordable credit, although also at the financial pressures in which can lead families to take on debt in order to get by.”

The report found in which about half of British households have some unsecured debt.

Some 43% of This specific will be loans by banks along with various other financial institutions, with credit along with store card debt (25%) along with hire purchase debt (21%) the various other major contributors.

The majority of This specific debt could be paid off, the report found.

“More than 60% of unsecured debt will be held by households with above-average incomes, along with more than half of households with unsecured debts have more than enough financial assets to pay them off,” the idea said.

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The problems emerged, the idea said, for households in which were already behind on doing debt repayments or in which spent a large amount of their income on servicing debts.

The report suggested:

  • Young adults aged in their 20s were more likely to be in households with problem debt than older people
  • Low-educated young adults were particularly likely to be struggling
  • Debt problems tended to be more persistent for low-income households

“Debt looks like a real problem for a significant minority of those on low incomes, who are not keeping up with bills along with, or, spending high fractions of their disposable income on debt repayment,” said the author of the IFS report, David Sturrock.

“Headline numbers are no guide to the scale of problem debt. Distinguishing between debts in which are entirely appropriate along with those in which look unmanageable will be crucial.”

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