Has debt become an inevitable part of life?
The UK has suffered a bout of economic stagnation in recent years, leaving many Brits in an unstable position, unable to afford everyday essentials or bolster their savings.
This has caused a surge in people taking out high-interest loans or entering their overdraft to pay the bills, with people across the country digging themselves deeper into a debt hole.
According to The Money Charity, the average total debt per UK household, including mortgages, in July 2025 hit £66,232, up from the £65,239 recorded the year before.
While some are able to budget carefully to get themselves out of financial trouble, others become trapped, leaving them with growing piles of debt that harm their financial position.
Affecting all ages and earners
Among older generations, 48 per cent of gen X admitted to holding debt as well as 36 per cent of baby boomers.
But strikingly, 50 per cent of gen Z find themselves in debt, while 56 per cent of millennials are also saddled with large amounts, with a third owing more than £5,000.
Higher earners were more likely to be in debt, with 50 per cent carrying £60,000 to £100,000 in debt, as well being most likely to fall behind or miss a debt payment.
Men also found themselves in more debt than women, at 46 per cent compared to 41 per cent.
Craig Rickman, personal finance expert at Interactive Investor, said: “Taking on short term debt isn’t necessarily a problem in itself, in some cases it can serve a very important purpose, acting as a temporary financial backstop to fund key expenses.
“The problems occur when you struggle to repay it.”
Unsecured debt spike
In recent years, the UK economy has been battered by the pandemic and soaring inflation, with people’s pay packets and pensions unable to keep pace.
Rickman said: “People’s finances are being squeezed by the higher cost of living and bigger tax bills due to fiscal drag, causing many people to turn to other sources to either make ends meet or maintain their current lifestyle.”
In particular, people have opted for unsecured loans, which are considered significantly risky due to the borrower not being required to pledge any specific assets as security, meaning they carry higher interest rates.
According to Nationwide, the average UK personal loan rate ranges from 5.8 per cent to 14.9 per cent depending both on the amount and borrower circumstances, such as credit score.
For millennials, industry figures credited their sharp rise in debt to reaching a period of life consistent with financial change, including getting on the property ladder or getting married, causing many to take on loans in order to achieve their financial goals.
Buy now pay later surge
Meanwhile, gen Z, are perhaps the first generation to be subjected to the influence of social media normalising debt.
Camilla Esmund, senior manager at Interactive Investor said: “Social media, alongside the ongoing pressure to ‘keep up’ and the rise of buy now pay later (BNPL) has a part to play in this normalisation.”
“BNPL effectively blurs the lines between regulated and unregulated credit.”
BNPL providers like Klarna are frequently found at checkouts on online retailers, however they are fast expanding into other areas of everyday life, including groceries and takeaways, luring Brits to spend beyond their means.
While social media can provide financial advice, Esmund added that some negative posts can create the message of “If we’re never going to be able to own a home, or afford any other big financial milestone, well what’s the point saving?”.
The risk of carrying debt into later life
Despite many young people shrugging off debt concerns, advisers warn carrying it into later life will impact financial security.
Committing a significant chunk of disposable income every month to paying off loans or overdue credit card payments, leaves people with less to place in pension pots and savings accounts.
Rickman added: “Reaching our older years straddled with debt creates its own set of challenges.
“Some may need to use their pension tax-free lump sum to clear borrowings, meaning this money isn’t available to spend on doing things they enjoy in their golden years.
Alternatively, people may be forced to remain in the workforce until the debt is paid off, which may stretch beyond state pension age, as they simply cannot afford to retire.”
Industry figures are urging Brits to increase their financial resilience, in order to curb the temptation to take on debt, and improve both their capital and retirement prospects.
In particular, there is a demand for better access to financial education, as many people voice concerns that they cannot access traditional advice due to it being overly complex and expensive.
Others noted the importance of retail investing, following the government and industry push to get more people to enter the stock market and take advantage of the returns it can offer.