Credit, Collections & Insolvency News
New figures from debt advice provider Financial Wellness Group has indicated that people are falling into problem debt at a younger age. 31% of new debt advice and solution customers are now under 30, up from 23% last year. Alongside this trend, customers are also more likely to be single now (60% of all new customers), and to have no kids (64% of new customers). Four in five new are either renting their home or living with family.
There’s also been a sharp rise in the numbers starting a debt solution who have Buy Now Pay Later (BNPL) and online shopping debts: up from 28% of customers last year to 42% this year. Whilst the average BNPL debt is relatively small at £250, some customers have up to 10 individual BNPL loans.
Deborah Ware, chief operating officer of Financial Wellness Group said “Worryingly, we are seeing an increasing trend toward people getting into serious problem debt younger – often whilst they are still living at home. In a rising number of cases this is driven, at least in part, by easy access to credit provided by some online retailers and by Buy Now Pay Later lenders. This type of lending is particularly dangerous as it encourages consumers to focus on the instant gratification of what they are buying, and think less about the affordability of the repayments over the coming months.”
The figures, contained in Financial Wellness Group’s 2019/20 Impact Report reveals a real squeeze on people with serious problem debt. Average debt levels rose by 7% compared to 2018/19 and now stand at £17,700. By contrast, the average disposable income that customers have to put towards those debts fell by 9% from £216 to £197 per month.
Whilst unemployment, low incomes and poverty all contribute to problem debt, they aren’t the only factors. Many of Financial Wellness Group’s customers are pushed into problem debt by a life change – from illness, a relationship breakdown or even pregnancy. In fact, the vast majority (97%) of Financial Wellness Group’s customers are employed or self-employed and typically have good incomes: the average gross annual income was £25,875, but 22% earn over £40,700 gross p.a.
Ware, added “The pandemic has left many households in financial crisis, with incomes squeezed and joblessness on the rise. However, the full impact of this on people’s over-indebtedness has been delayed by the widespread availability of payment holidays. As they start to fall away next year, we expect to see more people hitting a financial crisis point. In common with some other debt advice providers we have benefited from funding from the Money and Pensions Service to enable us to increase adviser numbers in preparation for the increased demand. Our goal is to help ensure that all those that want to access free debt advice in 2021 are able to do so. As always the advice is to seek help before your debts hit crisis point.”