Over two fifths of consumers stated that they are currently in debt, with credit cards still the most common form of borrowing, according to NerdWallet’s 2022 Household Debt Report.
NerdWallet UK analysed consumer debt by surveying 2,000 UK adults aged 18+, to find out how much the average person currently owes, and their concerns surrounding the cost-of-living crisis and their future financial security.
The 2022 Household Debt Report also asked Brits the amount of debt they’re in- with 74% of UK consumers currently owing up to £5k.
Brean Horne, personal finance expert at NerdWallet UK, said: “Borrowing allows us to pay for goods and services without having to cover the upfront cost ourselves.
“It’s very common for consumers to have some form of debt – but it’s important to ensure that you can afford repayments before taking out any credit agreement.
“Borrowers who manage their repayments and pay off their debt on time are unlikely to run into any issues.
“However, shoppers purchasing more than they can reasonably afford may be putting themselves at risk, especially as the cost-of-living continues to rise.”
Furthermore, the results of the report also found that school leavers and students as young as 18 are currently living in debt.
The research found that Gen Z’ers, aged 18 to 24, are accumulating different levels of debt.
While just over one fifth (21%) claim to have £600 to £700 worth of debt, one in eight (12%) owe £700 to £800, and almost one in six (13%) are already carrying more than £1k worth of debt, despite their young age.
Taking a look at the larger amounts of debt held by older age categories, almost one in three (31%) millennials, aged 25 to 34, state their debt totals less than £500.
What’s more, one in five (20%) millennials and over a third (35%) of those aged 35 to 44 claim they currently owe between £1k and £10k.
Unsurprisingly, results indicated that those aged 65 and over are struggling the least with debt, with almost half (49%) owing less than £700.
As well as this, the report reveals what UK consumers are most commonly using borrowed money for during the ever-increasing cost-of-living crisis.
It has been revealed that just under a third (31%) of consumers aged 35 to 44, and 29% of those aged 18 to 24, admit to borrowing money to pay for groceries.
About half that amount, 15%, of those aged 25 to 34 say they bought groceries on credit.
More than half (53%) of those aged 18 to 24 admit they have had to cut back on costs or missed essential payments.
And worryingly, more than two thirds (69%) also predict they will likely need to acquire further debt to deal with future financial pressures.
However, consumers aged 25 to 34 appear to have experienced the least impact from the cost of living crisis, with 64% saying that they don’t yet feel the need to cut back or miss any essential payments.
With a looming recession, rising interest rates, and fewer people able to save money for a rainy day, many households have expressed concerns about falling into problem debt.
The report by the personal finance experts at NerdWallet UK reveals that almost three quarters (74%) of consumers currently in debt fear becoming trapped by debt in the future.
Horne advised: “If you feel like your debt is piling up and becoming unmanageable, it’s important to seek help and take action immediately.
“There are many tried and tested ways to get your finances back on track, including prioritising or consolidating any outstanding debts, as well as speaking to your lenders to discuss your specific finances and realistic repayment options.
He continued: “Customers tempted to use different forms of borrowing should take note of all terms and conditions and make sure they understand how much they’ll be repaying and when.
“Calculating your overall debt can seem daunting, especially if you have fallen behind on your repayments. But understanding how much you need to repay can help you make a plan and take action to clear your debt.
“Once you know how much you currently owe, the next step is to make a budget to work out your monthly income and spending.
Horne concluded: “You don’t have to struggle with debt alone. There are lots of resources and services to help you pay off what you owe.
“Contacting a free, independent debt charity or service will help you find the support and guidance you need to get your finances back on track.
“A debt adviser will be able to talk through your financial circumstances and help find the best way to deal with your debt.”
