Unsecured debt soars by 40% to nearly £6k per person

Debt stamp

The average Brit is in debt by £5,898, up 41% over the past year, analysis has revealed.

Collectively we now owe an incredible £196 billion – up from £139 billion this time last year – in unsecured debt, spread across credit cards, overdrafts, personal loans, store cards, or finance agreements.

Two-thirds of consumers (66%) admit they have some form of unsecured borrowing. Half of them said they owe money on a credit card, while nearly a quarter said they were in their overdraft.

The most indebted age group is made up of those aged between 18 and 34. They have seen their debts almost double within a year from £5,446 to a worrying £10,058, while those aged between 35 to 54 saw their debts increase from £4,139 to £5,211.

The research from MoneySuperMarket raises concern that the apparent improvement in the economy is being fuelled by unmanageable credit card spending and other forms of borrowing.

Only 36% of borrowers think they will be able to pay off their debts within a month, while 24% think they will clear their debts within a year and 14% believe they will still be in the red for the next two to five years.

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Debt time-bomb

Dan Plant, consumer expert at MoneySuperMarket, said: "This research begs the question whether the economic recovery being celebrated by politicians is simply based on a rapidly climbing debt time-bomb.

"Not only are personal debts up by 40% across the board - with under 35s worryingly seeing what they owe more than double in just a year – they are being paid off more slowly than a year ago.

"This suggests the British public may be robbing Peter to pay Paul, with the increased consumer spending we've witnessed just a by-product of this – which would be hard to sustain. It was borrowing at excessive levels that was one of the contributing factors to the economic crisis so we must hope we aren't witnessing a repeat of mistakes of the past."

Meanwhile, the Institute of Financial Studies has reported average hourly wages in 2014 were 4.7% lower than they were in 2008, with those aged between 22 and 29 the worst affected with a 9% drop.

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How is this credit card "debt" calaculated? The article says 36% of people can clear their "debt" in a month. This suggests that the headline figure of total debt includes the collective sum of ALL credit card debit balances. If it does, then it is meaningless nonsense.
If I use a credit card and clear it completely every month, then there is no unsecured debt, because I always have the means to pay it. All I am doing is managing my available cashflow by using a credit card rather than a direct payment method.
If 36% of the population is doing this, then the total debt figure is being grossly, misleadingly, and irresponsibly overstated. The only credit card debt that makes sense is that left outstanding at the end of each monthly accounting period.

It become necessory to seek financial assistance safely.