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Debt is a massive problem for millions across the UK. Whether accumulated through emergency payday loans, unaffordable mortgages or simply as cheap credit available through personal loans or credit cards, paying it back has become a challenge, especially in light of recent lingering economic problems such as high inflation and disappointingly low wage growth.
This perfect storm has made it even harder for those already saddled with significant debts to pay back what they owe, especially given the cost of energy and food are rising at inflation-busting rates. Inevitably, some groups in society are likely to be affected more than most by being in debt, but who are they and why are they more prone to seeing their finances fall into arrears?
Low-income woe
It will come as no surprise that those on low incomes such as part-time workers and the unemployed are most at risk of experiencing debt problems. The fact that they earn less than average makes it harder for them to meet even the most basic costs, let alone any scheduled debt repayments. As the number out of work stands at around 2.5 million, there are plenty prone to falling into debt.
Those who’ve just been made redundant may have more reason to be fearful. The reason why is that, without a regular income to speak of, they’re having cut their cloth accordingly, especially if they’re trying to make room for debt repayments in order to stave off the threat of succumbing to bankruptcy. It’s one of the few options available for unemployed people with high debts.
Added insurance
Unemployed people who have their own home have at least one major asset which can help to pay off any massive debts in one fell swoop – their home. It might be a bitter pill for them to swallow, but handing their home over to the creditors can at least put bankruptcy at bay. Unfortunately, non-homeowners aren’t quite so lucky.
77% of people who file for bankruptcy are non-homeowners. This shows that non-homeowners are a little more vulnerable when they fall into arrears. As they tend to earn less money than homeowners and spend a slightly higher proportion of their income, in some cases, they may be only a couple of hundred pounds or so from seeing their finances fall into the red.
To avoid being declared bankrupt, there are a few things people could do irrespective of income. Cutting out luxuries such as subscription TV and meals at restaurants, spending the bare minimum on the basics, shopping around for bargains and, most importantly of all, agreeing some kind of deal with creditors on affordable repayments can help.