UK Hooked on Credit With Millions Trapped in Spiral of Debt

Dec 22, 2015, 06:43 ET from 118118 Money

LONDON, December 22, 2015 /PRNewswire/ --

  • 8m people in the UK have debt problems with just 1 in 6 seeking help 
  • 46% of Britons plan to pay for Christmas with credit and 1.4m plan to rely on payday lenders 

A recent survey by 118118 Money reveals that the UK is gripped by credit fever; even those climbing the career ladder and earning more, are finding that debt is a major issue. People earning between £20,000 and £30,000 a year have more credit card debt, car finance debt and loans than people on an annual income of between £10,000 and £20,000, according to the results.

Age Demographics 

The survey findings show those aged 35-54 who are at the peak of their career are 29% more likely than those aged 18-34 to have credit card debt. Those nearing retirement age are virtually debt-free, which could be attributed to them growing up at a time when it was normal practice to save up money before purchasing, rather than take out credit and worry about the consequences later.

Earnings vs. Debt 

Interestingly, those earning between £20,000 and £30,000 per year are 20% more likely to have loans than those on lower wages. When asked what the majority of their salary goes towards, they were 41% more likely than those with a salary of up to £20,000 to agree that most of their wage goes towards mortgage/rent. One reason for this could be that they have taken out a larger mortgage or are renting a property which is bigger or in a more affluent area.  

The North/South Divide 

When it comes to regional differences, those in the North are 25% more likely to have loans than those living in the South. They are also more likely to have mortgage, car finance or catalogue debt. However, they are also more likely to seek debt advice: 17% of those living in the North have received advice on how to deal with debts compared to 13% of those in the South.

Psychological Factors 

Dr Simon Manyiwa, Senior Lecturer in Marketing at Middlesex University London, who has published papers such as 'An investigation of the links between persuasive advertising, compulsive and addictive buying behaviours, and the personal debt burden in the UK' believes there is a whole host of sociological and medical factors that cause people to spend more than they earn. "Some people may be generally materialistic, while others may be compulsive buyers, who may buy more than they really need, which can easily turn into an addiction.

"It can also be related to self-esteem, especially if the individual is undergoing social problems such as losing a job or failing to achieve a certain goal. This is compensatory behaviour where the individual tries to consciously demonstrate that they are not a failure by the clothes they wear, the house they live in and the lifestyle they lead, which makes them overspend to compensate."

Gender Differences 

According to Dr Manyiwa, there can also be a link between how much people spend with variables such as gender, culture and family structure:  "Women can be more vulnerable to overspending while single parent households can try to over-compensate by spending more money on the children. This means the children often grow up demanding and expecting more material goods. In certain cultures, where those aged over 18 are regarded as independent adults, it's often the case that they make more mistakes financially than those who are still given support and guidance during their young adult life."

When asked why people appear to be happy to live beyond their means, Dr Manyiwa replied: "It's related to the whole political and economic system. There is no stigma attached to over-spending. No one sees it as a problem and the government has made it relatively easy to get credit."

Around 8 million people in the UK have debt problems, according to recent findings released by the Money Advice Service, with just one in six seeking help.

Bombarded with offers of 'buy now pay later' and 'no interest to pay until 2017' it's easy to see why people give in to temptation and spend rather than save. With Christmas approaching, which can leave many struggling after the expenses of the festive season, almost half of Britons (46%) surveyed planned to pay for Christmas by using credit and overdrafts, while 1.4 million planned to rely on payday loans, according to the 2014 Money Advice Service's annual Christmas spending survey.

The results revealed that some people live in the moment, rather than plan for the future, with 10% stating they 'spend now, worry later' and 13% admitting they 'live on a month by month basis'.

Just under half the adult population are not actively saving according to a recent IFS report, leading to the Money Advice Service, in conjunction with the UK Financial Capability Board, publishing a 10 year Financial Capability Strategy which aims to improve people's ability to manage their money better while developing their financial skills and knowledge.  

Chris Gillespie, CEO for 118118 Money, adds: "This initiative is line with our efforts to support customers to help them achieve a better credit rating so that they come through the bad times, pay off their debts and end up being able to borrow what they need, when the unexpected hits them."

Infographics will be available on the 118118 Money website from Wednesday 6th January 2016.

Notes to editors: 

118118 Money commissioned research company OnePoll to survey 1,000 UK adults aged 18-65 with a yearly salary of 10,000-30,000 during the period of 27 October - 3 November 2015 for its The State of the UK's Debt survey.

OnePoll are members of ESOMAR and employ members of the Market Research Society.

About 118 118 Money

Founded in 2013, 118 118 Money is a pioneering financial services business offering unsecured personal loans to customers who find it hard to get credit from their banks.  Offering a fair and transparent alternative to payday loans, 118 118 Money was first to market providing such loans, as its team of experienced underwriters use the latest technology and take the time to free up credit for hardworking customers across the UK, every day.  118 118 Money offers people the opportunity to borrow up to £5,000 over one to two years and pay back their loan in full using affordable fixed monthly payments.

This year 118 118 Money won the 2015 CreditToday Award as 'Alternative Lender of the Year - Mid/Shorterm' and the 2015 Award as 'Best Specialist Loan Provider'.

With the same iconic branding as the established 118 118 directory assistance service, 118 118 Money has become known for its innovative approach to providing financial services and loan products that help millions of families in the UK to better manage their finances.

For more information or full breakdown of the survey results, please contact:
Allison Tuffrey Jones
European PR Director
118118 Money
M: +44(0)7773-406402

SOURCE 118118 Money