Nine million households believe their debts are going to increase following the recent Budget, with them relying on credit to fund everyday spending for transport (8%), insurance (6%) and energy (5%), according to research by MoneySuperMarket.
The comparison site found that of the 32 million Brits (63%) with existing unsecured borrowing such as credit cards, overdrafts or loans, nine million (30%) will move even further into the red to cope this year.
17% state that they will try not to use any more unsecured credit, however they may have no other choice if they face unexpected expenses. 6% of those in debt expect to have to spend more simply to cover their essential monthly outgoings whilst an additional 8% already find it difficult to live within their means so will need to use credit to fund the shortfall – and this figure more than doubles to 19% in the North East.
Furthermore, the report shows that 40% of people in debt are forced 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. 8% will pay for their transport costs on plastic, six% to cover their utility bills (gas, electricity and water) and a further 6% will fall back on credit to pay for their insurance.
Where possible however, some people are taking necessary action to attempt to pay off their debts, with almost a third (30%) paying what they can each month to try and clear the deficit as quickly as possible. Meanwhile, 20% are making a monthly budget and, more importantly, are 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 (13%) and 9% have stopped going out, in order to get their finances back in shape.
Kevin Mountford, head of banking at MoneySuperMarket said: “We heard in the Chancellor’s budget that the economy is picking up but for many individuals the reality is very different. Money is still extremely tight and it will take much longer for them to feel like they’ve finally got a hold of their finances.
“Those relying on credit of some kind to pay their way need to start doing all they can to break that habit and get themselves into the black. It is encouraging to see that some people have recognised this and are seriously committed to clearing their debt, and using cost saving measures to do this.
“Debt needs to be tackled head on; simply working out a realistic monthly budget and cutting out unnecessary expenditure should be the first step.”
