Brits scramble to borrow more than £100bn with average loan hitting £5k as cost of living crisis deepens
Brits will borrow £101.1b on new credit cards, loans, overdrafts and other forms of new credit arrangements in the next 12 months, new data shows today,
Research undertaken by YouGov on behalf of financial services review platform Smart Money People, found that 71 per cent of people currently have less disposable income than they would usually have on average per month due to the current rise in the cost of living.
This is leading people to consider other ways to make ends meet: Two-fifths of UK adults will have some form of credit over the next year due to the cost of living crisis (i.e. rising prices for fuel, energy and food).
Borrowers predicted they would look to borrow an average of £5,259 each.
43 per cent of people who will take out new credit2 are already worried about how they are going to meet the terms of their repayments.
A fifth of the adults who say they expect to take out a new form of borrowing in the next 12 months, will do so to cover day-to-day expenses. This is equivalent to 8% of the adult population as a whole, or 5.5m people.
One in ten of people borrowing over the next 12 months will do so to consolidate existing debts.
The bulk of this new borrowing is predicted to occur during autumn (15 per cent) and winter (32 per cent). A further 13 per cent were unsure exactly when they would borrow but expect it to be when energy price rises affect them.
Credit cards most popular
Smart Money People’s survey also revealed that the most popular type of credit in the next 12 months will be a credit card: 34 per cent of expected borrowers say this will be their preferred method of credit.
Based on the survey, the other most popular types of borrowing in the next year are expected to be an agreed overdraft (17 per cent) and Buy-Now-Pay-Later (15 per cent), a relatively new form of credit where the method of payment is in instalments with low or no interest rates.
Twelve percent of people stated they would borrow from family and friends.
Jacqueline Dewey, CEO of Smart Money People said: “We know that many people have very little, if any, savings to help them get through this period of high inflation, and if they have already made cutbacks, they have almost no choice but to turn to credit.”
She added: “Providers will do credit checks for some forms of lending but Buy-Now-Pay-Later schemes do not apply the same rules, and of course, family and friends don’t either, so it is entirely possible to accumulate a worrying level of debt very quickly.