13 million households believe their debt situation is going to worsen before it gets better, according to research by MoneySuperMarket.
The comparison site found that of the 33 million adults (66%) with existing unsecured borrowing such as credit cards, overdrafts or loans, 13 million (25%) will have to take on even more debt to cope this year. This represents a 44% increase from 2014, when nine million (30%) were forced to move further into the red. 18 to 34 year olds are particularly vulnerable, with 58% expecting to use credit to cover their costs this year.
Overall, 15% of those in debt state they will try not to use any more unsecured credit, however they may have no other choice if they face unexpected expenses. An additional 14% already find it difficult to live within their means so will need to use credit to fund the shortfall, and this figures doubles to 28% amongst 18 to 34 year olds. A further 9% will be forced to use credit simply to cover their essential monthly outgoings.
37% of people in debt continue to rely on credit in order to pay their way day-to-day, be it a credit card, personal loan, overdraft, store card or a finance agreement. 9% will pay for their utility bills (gas, electricity, water) on plastic, 8% have to resort to credit to cover their transport costs and a further 4% will fall back on credit to pay for their mortgage or rent.
Kevin Mountford, head of banking at MoneySuperMarket, said: “While inflation is at an all-time low, and UK debt is expected to fall next year, there is still a long way to go before many consumers are out of trouble. It’s important that those relying on credit keep in control of the situation, so their debt doesn’t spiral out of control. Simply working out a realistic monthly budget and cutting out unnecessary expenditure should be the first step.
“Consumers should also ensure they have the most suitable financial product to get them back to black. For example, consolidating several balances onto a credit card that charges 0% on balance transfers will help cut out any extra costs if they can pay the balance back in time. If this is going to be difficult, then a low rate credit card or a low rate loan are other options.”
However, the report shows people are making some inroads into tackling their debt. 30% pay what they can each month to try and clear the deficit as quickly as possible. Furthermore, 21% are making a monthly budget and are actually sticking to it and a further 19% have set up a standing order to pay owed money automatically. Consumers who were making luxury purchases are giving them up (14%) and are even stopping going out (13%), in order to get their finances back in shape.