How to get back to black – as the nation’s debt balloons

Exclusive MoneySuperMarket research reveals that personal debt in the UK is continuing to rise to worrying levels.

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Click here to read our 2016 report, with full analysis and a regional breakdown

New research from MoneySuperMarket has revealed the following debt statistics:

£6,000:  Average amount of unsecured credit owed by each UK adult

66%: Proportion of adults who have unsecured borrowing

£5,898: Average unsecured debt of each UK adult

18-34: Age range that has seen their unsecured debt double in last 12 months

Lending and spending on the up

Unsecured personal debt in the UK has risen by a staggering 41% in the last 12 months and now stands at £196billion (up from £139billion this time last year).

This means that each UK adult now owes an average of £5,898!

Almost half (47%) of those in debt now owe MORE than they did last year, while a fifth (21%) of those who were debt-free in 2014 now owe an average of £1,105. Almost half (45%) are still in the same amount of debt as they were last year.

If you think the overall figures are worrying, drill down to specific demographics and it gets even worse.

Last year average debt levels for the under-35s stood at £5,446, but have now DOUBLED to a staggering £10,058.

Ticking time bomb

The UK’s ballooning debt could be attributable to regenerated consumer confidence born out of the fact the economy is growing again.

As a nation, we’re not only taking longer to pay down existing debt, we’re also not averse to adding to it. And this could have serious implications for the economy.

This is what Dan Plant, MoneySuperMarket’s consumer expert had to say: 

“This research begs the question whether the economic recovery being celebrated by politicians is simply based on a rapidly climbing debt time-bomb. It suggests the British public may be robbing Peter to pay Paul, with the increased consumer spending we’ve witnessed just a byproduct of this – which would be hard to sustain. Borrowing at excessive levels was one of the contributing factors to the economic crisis in the first place so we must hope we aren’t witnessing a repeat of mistakes of the past.”

Get back to black

Do you recognise yourself in the statistics? You might not be too worried – after all, just over a third (36%) of borrowers expect to pay off their debts within a month, our research says, but for a quarter (24%) debt-freedom will take a year.

Whatever debt you are saddled with though, and however you got it, the best place to live is firmly in the black. Here’s how you can get back there:

If you are always overdrawn:  Consider switching current account to one that offers a free overdraft facility.  First Direct’s 1st Account offers the first £250 of your overdraft interest-free, or the Nationwide FlexDirect Account has a 0% overdraft for the first 12 months the account is open.

If you’ve got stubborn credit card debt:  Transfer the balance to a card with an interest-free period – if you qualify for the Barclaycard Platinum Credit Card with Extended Balance Transfer this will give you up to 35 months to pay the balance before interest is lumped on, subject to a 2.49% transfer fee.

If you don’t need that long (or your debt is already with Barclaycard in which case you won’t be able to transfer is) try Santander’s Credit Card which offers 15 months at 0% with no balance transfer fee and no annual fee.

If you are repaying a personal loan (slowly):  Once your direct debit is set up for the fixed monthly repayment on a personal loan, you usually can’t increase it. What you can do is make one-off extra payments to reduce the overall interest you pay and the term – but you will need to inform your lender first. If you have enough in savings and have more than 12 months left on the loan, the Consumer Credit Act 1974 states you can clear it early and incur charges of no more than 58 days’ interest.

If you have debts on more than one credit line, it may be worth looking at a debt consolidation loan to not only pay less in interest, but to give yourself more structured monthly repayments.

The key to digging yourself out of debt is to budget and effectively manage your money.

Dan Plant said: “Work out how much you can realistically pay off each month, whether you can make any spending cutbacks, and stick to your plan – then it’ll be much easier to get back to black.”

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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