1.7m consumers forced to borrow from high-cost lenders to pay off existing loans

1.7 million people across the UK are borrowing from high-cost lenders in order to pay off existing debts, according to research by Creditspring.

The research found that a quarter of people (24%) who borrowed from high-cost lenders sought credit so they could repay other debts. The same proportion (24%) who borrowed from high-cost lenders admitted that the fees they later faced were higher than expected

Whilst one in ten (11%) people aged 18-34 have taken out a new credit card to afford grocery shopping whilst 8% have taken out a new credit card to pay their bills.

Neil Kadagathur, Co-Founder and CEO of Creditspring, said “The UK is teetering on the edge of a debt crisis. The rising cost of living has driven reliance on credit but also forced millions of people into a corner where they’ve no choice but to borrow from several lenders to survive. This situation can rapidly spiral out of control and put households under unimaginable financial pressure.”

“Given the reliance on credit at the moment, it’s vital that the industry offers more support to borrowers and urgently improves transparency around costs, empowering people to make more informed decisions about borrowing and reducing the risk of people falling into an unmanageable debt spiral. Unfortunately, the lending industry remains opaque when it comes to borrowing fees – all too often there is a lack of transparency around the true cost of borrowing and millions of people are hit by hidden and unexpected charges.”

Theodora Hadjimichael, Chief Executive, Responsible Finance, said “The huge rise in people pushed into financial instability by rampant inflation and economic turbulence is impossible to ignore. Credit doesn’t solve the cost of living crisis or address the issues of wages or benefits which aren’t enough to live on. But credit is a fact of life, used to smooth uneven income or expenses, so it’s frustrating to see how some lenders’ hidden costs and lack of transparency actually make things worse for people.”

The research found that a fifth of people (20%) have already dipped into their savings to pay off debts, rising to 39% for younger people aged 18-34.

There is also a concerning reliance on savings to pay bills – with more than 11 million people across the UK dipping into savings pots to afford bill payments**. A fifth (21%) of people rely on savings to pay bills, rising to 37% of younger people, and 22% admit that when they’re savings run out they will be forced to seek a loan to survive.

Kadagathur added “Millions of people are raiding their savings just to survive the current cost of living crisis – clearly, this will have a disastrous impact on their future financial wellbeing unless drastic action is taken. Much more support is needed by government over the next few months but it’s also time for lenders to step up and provide more responsible credit products that protect borrowers and don’t encourage them to take on extortionate debts.”