Unsecured loan debts hit two-year high - Palmers Solicitors

Unsecured loan debts hit two-year high

Outstanding balances from unsecured lending in the UK have reached their highest level in two years, according to new statistics.

The debt statistics data for January 2014, published on 7 March by The Money Charity, showed there had been a sharp increase in the amount of money people owed on unsecured loans including credit cards, bank account overdrafts and personal and payday loans.

The charity said that for the last three years, outstanding balances had fallen in January, compared to the previous month. However, 2014 saw a significant rise, taking the total balance to more than £160 billion for the first time since January 2012.

Money Charity chief executive Michelle Highman said: “The recent rise in outstanding balances on unsecured loans could be attributed to the mounting financial pressures consumers are currently facing.

“We know that escalating debt and living costs constrain consumer spending and often force people to prioritise their debt. This usually means focusing on arrears where the consequences of not paying them can be incredibly serious, such as mortgages, child maintenance payments, TV licence.

“Consumers may be finding that once they have paid their priority debts and covered basic living costs, they don’t have the additional funds to pay their unsecured loans and as a result continue to incur high monthly interest.”

The figures also revealed that average household debt, excluding mortgages, rose from £5,990 in December to £6,087 in January and that £162 million of interest was paid every day on personal debt in January. In total, the total amount of personal debt at the end of January was £1.439 trillion.

Andrew Skinner, head of Palmers’ Insolvency team, said: “The impact of personal debt is not only financial. The worry of not being able to meet financial obligations can create real emotional stresses and strains and affect all aspects of someone’s life.

“Professional advice can be a wise investment in helping people to resolve their debt and insolvency issues. At Palmers, we can explore the informal and formal options relevant to individual circumstances and help people make informed decisions about the way forward. For more information, please contact our Insolvency team.”