Credit, Collections & Insolvency News
Faced with the cost of living crisis and interest rates continuing to rise, many consumers may feel pressured to spend more than they can afford this Christmas, increasing their risk of ending up in debt they struggle to get out of according to research by NerdWallet.
As part of the company’s new 2022 Household Debt Report, the research found that one in five (22%) consumers admit to using borrowed money in order to pay for their groceries amid the cost of living pressures which has caused the average household food bill to increase by £682 per year.
With the results of the report indicating that school leavers and students as young as 18 are currently living in debt, the poll asked consumers of different age groups to give a breakdown of the amount of money they owe.
The research found that Gen Z’ers, aged 18 to 24, are accumulating different levels of debt. While just over one fifth (21%) claim to have £600 to £700 worth of debt, one in eight (12%) owe £700 to £800, and almost one in six (13%) are already carrying more than £1,000 worth of debt, despite their young age.
Taking a look at the larger amounts of debt held by older age categories, almost one in three (31%) millennials, aged 25 to 34, state their debt totals less than £500 whilst one in five (20%) millennials and over a third (35%) of those aged 35 to 44 claim they currently owe between £1,000 and £10,000.
Results indicated that those aged 65 and over are struggling the least with debt, with almost half (49%) owing less than £700.
With many concerned about the rising cost of living and whether they will be able to afford their essential outgoings this winter. UK consumers seem to be split when it comes to what concerns them most about their debts, with almost half (47%) of respondents currently in debt saying that the cost of living is their biggest worry, while 41% highlighting that energy bills are their main concern.
While just under a quarter (24%) of Brits polled are worrying about paying for heating and electricity over the next 12 months, 49% of those aged 55 to 64 and 40% of those aged 65-plus disclosed that it was among their biggest concerns at the moment.
It has been revealed that just under a third (31%) of consumers aged 35 to 44, and 29% of those aged 18 to 24, admit to borrowing money to pay for groceries. About half that amount, 15%, of those aged 25 to 34 say they bought groceries on credit.
More than half (53%) of those aged 18 to 24 admit they have had to cut back on costs, or missed essential payments. And worryingly, more than two thirds (69%) also predict they will likely need to acquire further debt to deal with future financial pressures.
However, consumers aged 25 to 34 appear to have experienced the least impact from the cost of living crisis, with 64% saying that they don’t yet feel the need to cut back or miss any essential payments.
The report reveals that almost three-quarters (74%) of consumers currently in debt fear becoming trapped by debt in the future.
Women were more likely to fear falling into problem debt than men. The report shows 60% of women admitted to debt concerns compared with just 41% of men,.
Brean Horne, Personal Finance Expert at NerdWallet, said “Borrowing allows us to pay for goods and services without having to cover the up front cost ourselves. It’s very common for consumers to have some form of debt – but it’s important to ensure that you can afford repayments before taking out any credit agreement. Borrowers who manage their repayments and pay off their debt on time are unlikely to run into any issues. However, shoppers purchasing more than they can reasonably afford may be putting themselves at risk, especially as the cost of living continues to rise.”
“If you feel like your debt is piling up and becoming unmanageable, it’s important to seek help and take action immediately. There are many tried and tested ways to get your finances back on track, including prioritising or consolidating any outstanding debts, as well as speaking to your lenders to discuss your specific finances and realistic repayment options.”
“Customers tempted to use different forms of borrowing should take note of all terms and conditions and make sure they understand how much they’ll be repaying and when.”
“Calculating your overall debt can seem daunting, especially if you have fallen behind on your repaymentss. But understanding how much you need to repay can help you make a plan and take action to clear your debt.”
“Once you know how much you currently owe, the next step is to make a budget to work out your monthly income and spending.”
| How much debt? | % |
| £0-250 | 6% |
| £251-500 | 14% |
| £501-£600 | 12% |
| £601-£700 | 10% |
| £701-£800 | 7% |
| £801-£900 | 5% |
| £901-£1000 | 6% |
| £1000 – £5,000 | 14% |
| £5,001 – £6,000 | 3% |
| £6,001 – £7,000 | 1% |
| £7,001 – £8,000 | 1% |
| £8,001 – £9,000 | 1% |
| £9,001 – £10,000 | 3% |
| £10,001+ | 4% |
| Prefer not to say | 14% |
| Age groups by debt owed | 18 to 24 | 25 to 34 | 35 to 44 | 45 to 54 | 55 to 64 | 65 and over |
| £0-250 | 5% | 3% | 10% | 1% | 5% | 10% |
| £251-500 | 21% | 28% | 12% | 7% | 8% | 12% |
| £501-£600 | 7% | 11% | 8% | 7% | 18% | 19% |
| £601-£700 | 21% | 7% | 9% | 4% | 13% | 8% |
| £701-£800 | 12% | 6% | 3% | 2% | 12% | 6% |
| £801-£900 | 6% | 3% | 3% | 4% | 6% | 6% |
| £901-£1000 | 5% | 4% | 6% | 7% | 4% | 7% |
| £1000 – £5,000 | 6% | 13% | 22% | 18% | 13% | 10% |
| £5,001 – £6,000 | 3% | 1% | 7% | 2% | 4% | 2% |
| £6,001 – £7,000 | 2% | 3% | 1% | 0% | 0% | 1% |
| £7,001 – £8,000 | 1% | 2% | 3% | 0% | 1% | 1% |
| £8,001 – £9,000 | 0% | 1% | 1% | 0% | 1% | 1% |
| £9,001 – £10,000 | 1% | 0% | 1% | 0% | 3% | 11% |
| £10,001+ | 1% | 7% | 6% | 7% | 3% | 2% |
| Prefer not to say | 9% | 12% | 8% | 39% | 9% | 5% |