home loan finance blog
Britons are in denial about their level of debt, according to the publication of new statistics. In research carried out by Chiltern, about four million adults are officially overstretched when it comes to paying back money owed on personal loans, credit cards and other types of borrowing. But with some two-thirds of such consumers denying they are in difficulties, their financial problems may well be much graver than they think. Overall, one in 16 consumers are shown to be putting more than a quarter of their wages towards servicing unsecured debts every month – with this being the barrier by which the government claims people are over-indebted. However, only one out of 45 Britons questioned by the debt management firm admitted to being seriously overstretched when it comes to managing their money.
According to the findings, men could have a more accurate idea about their levels of debt, as some 2.5 per cent claim that their finances are seriously overstretched, in comparison to two per cent of women. Meanwhile, 6.8 per cent of males said that more than a quarter of their salary is taken up by loan, credit and store card repayments – some 0.4 per cent above the national average and 0.8 per cent higher than females.
Joanne Gill, spokesperson for Chiltern, said: There are lots of people who are officially over-indebted, but two-thirds of them dont think they have a problem. Unfortunately debts dont go away, they need to be repaid and ignoring them will just make the situation worse. Anyone who is paying a quarter of their income to service unsecured debts should get help to put those repayments on a sustainable footing before the situation gets worse.
Research from the debt management company also revealed that 35 to 44-year-olds are experiencing the greatest difficulties in managing their money. More than one out of ten (10.9 per cent) people in this age group claim that at least 25 per cent of their income services debts, compared to 3.4 and 3.2 per cent of the over-65s and 18 to 24-year-olds respectively. Meanwhile, those in East Anglia were shown to be most delusional about their finances. With only 0.7 per cent of people from the region feeling that their finances are gravely overstretched, such residents were revealed to be putting more of their income towards debt payments than anyone else in the country.
Commenting on the study, Julia Dallimore, marketing director at Picture Financial, stated: This builds on our recent research highlighting that 1.8 million of us never review or sort our finances, yet 42 per cent worry that they are not getting the best deal on interest rates and charges. What is vital in a financial environment of borrowing, increasing interest rates and multiple sources of credit, is a level of personal engagement with our money.
As a result, Ms Dallimore reported that the Chiltern study acts as a reminder as to why Britons need to adopt a more proactive approach towards their existing borrowing situation. She claimed that consumers should be aware of all the various options available when it comes to reducing monthly repayments, with possible methods including switching to credit providers which offer more competitive rates of interest, seeking out independent financial advice or taking out a debt consolidation loan.
Meanwhile, opting for such a loan could be an advisable way of clearing off existing debts as soon as possible to help free up money to be put aside for retirement. In a study carried out by Aegon, a third of Britons believe they are currently saving enough cash to have a comfortable lifestyle when they are older, as 35 per cent think they will be able to stop working before reaching 65. However, the findings revealed many consumers could face difficulties in paying back loans and credit cards well into later life as 22 million are risking retirement poverty – as 9.6 million have no form of pensions or long-term savings account set up. Malcolm Flanders, director of individual pensions, claimed: We need to take off our rose-tinted glasses and take responsibility for properly planning our financial futures.