Average debt has dropped by 32% over the past year
New research by Experian has revealed that the average debt in the UK has dropped by 32% (nearly one third) over the past year of living with the enforced Covid-19 lockdowns.
The average credit balance across all accounts, excluding mortgages, is now £7,851 – when it was £11,615 at the start of March 2020 and £9,681 in June 2020.
The data shows that the company’s ‘CreditExpert’ customers had an average credit balance across all accounts (excluding mortgages) of £7,851 in March 2021, compared to £11,615 in March 2020. Debts have continued to reduce since June last year when credit balances averaged £9,681.
Experian says it is likely the reduction was primarily driven by fewer opportunities to spend on non-essential items and lower transport costs as a result of the restrictions. A further factor has been changes in credit availability, as lenders have adapted their offers. However, lenders are continuing to return to the market with new offers and customer eligibility for credit has risen accordingly, almost reaching pre-pandemic levels.
James Jones, Head of Consumer Affairs at Experian, said “It’s encouraging that borrowers have managed to reduce the balances on their credit cards and loans, with lockdown impacting day-to-day spending and saving habits. As a result, many have improved their credit score and financial position more generally.”
“The supply of affordable credit has also improved significantly, so people now have more options if they’re looking to reduce interest rates on their existing debts. We would encourage anyone paying unnecessary interest on outstanding credit balances to compare their options and check their eligibility using a comparison service like Experian’s.”
“While some people have been able to improve their financial position, we know many have struggled, especially where incomes have been hit. Our advice to people with money worries is to seek support and contact their lenders without delay. The sooner there’s a plan in place, the sooner you’ll be back in control of your finances”.