Half of those with debt concerns now blame rising costs of living above traditional reasons such as job loss or the end of a relationship for pushing them into debt. Research by insolvency trade body R3 revealed the next trigger was loss of employment, cited by one in five (20%) of respondents followed by paying for non-essential items, such as a holiday (17%).
R3 President Lee Manning comments:
“In the past those worried about their debt spoke of one-off events that happened to them, such as losing their job or partner or something they did such as paying for an expensive holiday being the cause. Nowadays, rising living costs and wages failing to keep up is a reason alone, and the prolonged effects of this squeeze are taking their toll on the nation’s finances.”
Today’s picture is no brighter for those with specific debt obligations – nearly half of those (46%) with a payday loan had prioritised paying back the loan over buying food, and 62% paying back the loan over buying clothes for themselves or family members.
Lee Manning continues:
“According to the providers, payday loans were created as one-off fix to a financial shortfall, but in reality leave some unable to buy clothes for their family or even buy food. These findings illustrate that while these loans are convenient and quick to access, paying them back can be a much greater slog. I would question whether the loan was right in the first place if repaying it means someone has to prioritise that over food.
Of those who currently pay for childcare, 33% have at some stage had to use their savings, and 24% their overdraft to meet these costs.
“The crippling costs of childcare are well reported: this research shows us that of those who currently pay for childcare, many are dipping into savings or an overdraft. In addition, 17% of respondents use loans from friends and family, or credit cards, to meet these costs. It is clear that paying for childcare is proving a real struggle.”
Looking ahead, there is a change of mood. For the first time since July 2010, more think their financial situation will improve (21% of respondents) than worsen (18%) in the next six months.
Lee Manning concludes:
“Signs of optimism are clearly to be welcomed, and many have tailored their budgets to suit their circumstances by now. I remain concerned for those on the extremities of the debt landscape, those with no savings or saddled with high cost loans, and would urge this group to consider all their options, including speaking to a professional.”
Submitted by R3