Debt defaulters have high stress levels with a significant number suffering from sleep deprivation and alcohol or substance abuse. The findings come from a UK-wide survey of over 2,000 borrowers commissioned by Arrow Global, a European purchaser and manager of debt portfolios.
The research found that 25% of borrowers have struggled to make repayments at some stage in their life. 60% of these ‘debt defaulters’ have trouble sleeping, 32% have trouble with personal relationships, 24% have mental health problems and 16% have abused drugs or alcohol.
The impact of debt stress is greatest on lower income households with 25% of those with a household income below £10,000 a year saying they have abused alcohol or drugs as a result of their debt. This compares to 10% of those with a household income of £30,000 or more. Similarly, 44% of debt defaulters with the lowest household income report experiencing mental health problems, compared to 13% of those with a household income of £30,000 or more.
There is also a noticeable difference in debt stress between men and women, with female debt defaulters far more likely to have trouble sleeping (69%), but less likely to have abused alcohol or drugs (14%).
The types of loan most debt defaulters struggle to repay are credit card repayments (60%). Over half of those who have struggled with their credit card debt are over 55 years old (58%), with just 25% aged between 18 and 24 years old. The research also found that a significant number of borrowers aged 55 years or over struggle to pay back unsecured loans (24%).
The research highlights that people often default through no fault of their own, with the most common reason being ill health (25%), followed closely by loss of job (23%).
48% of all borrowers never feel the need to cut back on day to day expenditure. However, a third (34%) stop eating out as much to ensure they can make repayments, while 27% reduce spending on holidays and 26% cut back on buying clothes. Interestingly, there is a huge difference in the way men and women tailor their spending habits. Of those surveyed, 18% of females said they would cut back on food and 31% cut back on clothes to help pay off their debt, compared to only 9% and 18% of men respectively.
Tom Drury, chief executive officer of Arrow Global, said: “Struggling with debt repayments has a social stigma attached to it, adding to the stress people experience when in debt default. If there was more open and frank discussion of debt and less of a taboo, debt default could be less stressful for borrowers. It would also make it easier for borrowers to confront their debt earlier on by reaching out for help before their debt becomes unmanageable.
“This is why it is so important to remember that people often get into debt through no fault of their own. In many cases a perfectly manageable debt becomes unmanageable because of factors outside of someone’s control such as illness, which is the number one cause of debt default according to our research.
“The challenge to both Arrow Global and the industry as a whole is to work with our customers to ensure we’re doing everything we can to reduce the levels of stress associated with debt. By working with charities such as StepChange and National Debtline, we’ve already made great strides, but there is still more we can all do to enable people to get on top of their debt in a manageable way.”