15% of in-debt consumers turn to illegal money lenders

Almost half of consumers are in some kind of financial debt, with 15% of those turning to illegal money lenders, according to new research from VoucherCodes.co.uk.

The research found that 48% of respondents say they are in at least one type of debt (excluding mortgages), with credit card spending (78%) and overdraft repayments (44%) being the main reason they owe money. The research also found that Millennials are most likely to turn to illegal lending channels. The average borrower from a loan shark owes £744 to their lender and that Gen Z-ers are more likely to ask parents for financial help than cut back on holidays.

People in Edinburgh are most likely to find themselves in some kind of debt (55%), with over half of the residents of Derby and Cardiff also admitting to owing money (both 53%).

Perhaps more surprisingly, 15% of all respondents who owe money say that they are indebted to loan sharks – owing £744 on average.

There are stark generational differences too, with millennials going down the loan shark route to obtain extra cash more than any other generation (23%). They are also big users of payday loans and ‘buy now, pay later’ schemes – both used by more than half of in-debt 25-34-year-olds (52%).

When asked how much money it takes to be ‘in debt’, millennials say they wouldn’t classify themselves as such until they owed £5,773. This is 36% higher than the amount those aged over 55 would consider themselves to be in the threshold of being in debt (£4,246).

But, when it comes to trying to get out of financial difficulty, Gen Z-ers (18-24) are far less likely to cut back on experiences such as holidays (32%) than those aged 55+ (63%). Instead, more than two in five 18-24-year-olds would rather turn to their parents to overcome their financial troubles (42%). In the case of nearly one in 10 Gen Z-ers though, they consider debt to be nothing more than an “inevitability” and not something worth worrying about (9%).

Anita Naik, Lifestyle Editor at VoucherCodes.co.uk, said “While avoiding debt can sometimes be difficult, it is concerning to find such a high proportion of people have turned to illegal money lenders as a way to obtain finance. This is something that should be avoided at all costs – there are other measures that can be taken to help reduce debts instead.”

“For example, while some may be hesitant to forgo holidays or even smaller recurring costs such as subscriptions to streaming services like Netflix or Spotify, cutting back can really help to save money. Our research shows that this is the most popular solution, with half of respondents saying they would miss out on Netflix or trips away in order to reduce their debts.”

“Spending is of course inevitable, but in order to do so within your means, it’s worth considering easy steps like using discount codes to take advantage of the savings available to you when you shop.”

Top reasons for being in debt:

Rank

Cause of debt

Percentage of people currently in debt

1.

Debt on credit cards

78%

2.

Using an overdraft

44%

3.

Taking out a personal loan

42%

4.

Using ‘buy now, pay later’ schemes

42%

5.

Borrowing from a friend or family member

33%

UK cities with the highest proportion of people currently in financial debt:

Rank

City

Percentage of people currently in debt

1.

Edinburgh

55%

2.

Derby and Cardiff

53%

3.

London

52%

4.

Norwich and Belfast

50%

5.

Leeds and Manchester

50%