This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Worried about your debt and wondering if it’s normal? Let’s find out. This article aims to give you answers.
Here is what we’ll cover:
The current average personal debt in the UK
What causes the most debt
How many people have debt products
How debt differs by age, region, and gender
Ways to manage and possibly reduce your debt
Feeling unsure about your debt can be hard. But don’t worry; you’re not alone. Every month, over 170,000 people visit our website for advice on debt.
We’ll use clear facts and figures to help you understand debt in the UK. Let’s get started!
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This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.
UK Personal Debt Statistics
Here’s a snapshot of average debt in the UK:
At the end of February, the UK population owed £1.698.4 billion, an increase of £15.1 billion or £286 per adult.
The average adult owes £33.410 in total debt.
In March 2021, the Office for Budget Responsibility predicted that the total UK household debt would climb from £2,006 billion in 2020 to £2.354 billion in 2025, resulting in an average total debt of £82,641 per household in the United Kingdom.
Water, electricity, and gas cost the average UK household £4.20 each day.
During the first quarter of 2021, 290 people were declared insolvent or bankrupt in England and Wales.
Between December 2020 and February 2021, 2,267 employees were laid off every day.
In the months of October to December 2020, a property was repossessed every 15 hours and 46 minutes.
There were an additional 18 UK mortgages in arrears every day that was more than 2.5% late.
850 people were out of work in the UK every day in the last year.
There is an average cost per day of £23.25 for couples and £28.22 per day for a single parent to raise a child from birth to the age of 18.
We started our research into UK debt statistics by looking into why people get into debt in the first place. Here’s what we found.
There are so many different stories about why people landed in debt. The most common is to do with losses of income and unexpected expenses. Sometimes it is the result of simply overspending and a lack of financial literacy.
Nearly 50% of all reasons for falling into debt in the UK were unemployment or redundancy, reduced income or benefits, and lack of control over finances. Not only that but England and Wales declared 313 bankrupt or insolvent individuals every day between August and October of 2021. That’s one every 4 minutes 37 seconds.
Of course, a lot of the unemployment and redundancies can be put down to the pandemic, and many people who were still employed were put on furlough to help subsidize income, and we witnessed the UK economy falling into hardship.
Because of this, there was a significant amount of government debt accrued from millions of people nationwide being put on furlough. Borrowing from credit lenders became inevitable as families tried to keep up with monthly repayments on necessities.
But, many people in England and Wales found themselves paying out way more than they could afford.
However, these other causes are still valid reasons for going into debt.
Personal loan debt is just over £5,000 on average per household.
Personal loans account for an average debt of £5,233 in debt per household, not including student loan debts. When this is taken into account, the average household debt in the United Kingdom climbs to £10,145 per household. It is safe to argue that student debt is a heavy burden for young people in the United Kingdom.
Included in this figure are personal loans, home improvement loans, and vehicle loans. In the same way that average credit card debt has become more prevalent, personal loans have become a popular way to pay for things in recent years.
There has been significant growth in student loans over the past 10 years, as shown in the chart below, approximately a fourfold increase.
Average UK household debt over the last decade. Source: NimbleFins.
Since the financial crisis began in 2008, household debt has risen from 85% to 148%. During this time, banks were reluctant to lend money to consumers. Therefore, the following years fluctuated when it came to debt-to-income ratios.
Research shows from the Office for Budget Responsibility (OBR) that the household debt-to-income ratio will climb gradually over the next few years, reaching 150% by early 2024.
How Many People Have Debt Products?
Personal debt can take numerous forms, ranging from mortgages to bank overdrafts and credit card debt to college loans. Mortgages, predictably, are the largest in terms of total debt. A mortgage is held by roughly one-third of UK households.
In terms of debt other than mortgages (often referred to as consumer credit), more than half of UK adults (51%) have accessed it in the last year. This figure does not include the 29% of adults who use credit products, primarily credit cards but pay them off in full every month (known as “transactions”).
Has the Average Personal UK Debt Increased?
According to the same source, personal debt has increased by £498 per adult since the fourth quarter of 2019.
This works out at more than £26 billion more debt across the UK in just 12 months. Thus, UK debt trends have been on the rise since the pandemic struck.
Debt by Age Group UK
The table below displays the percentage of UK adults, broken down by age group, who have or have had various types of consumer credit products in the last 12 months (2017 data).
Overall, people aged 25-44 are the most likely to have consumer credit, with 71% of those aged 25-34 doing so, compared to only 20% of those aged 65 and up.
Debt levels are highest among homes with a head of household aged 18 to 34 years old, with an average non-mortgage household debt of £10,400. In general, the older a person gets, the less debt he or she owes.
Having said that, those over the age of 75 have the lowest average credit card debt and household debt, at £4,400.
Debt by Region UK
If age is something that needs to be taken into account when it comes to looking at the average personal debt in the UK, then we must also look at the region too.
Salaries, house prices, and the general cost of living differ from region to region around the UK, so, therefore, levels of debt will differ because of affordability.
We found these useful tables from the House of Commons Library (put together by the FCA) that show the difference between the average debt by region for those with a mortgage, a student loan, and those without.
As you can see, areas with larger cities and the capital have much higher average personal debt than those from less populated areas of the country.
Debt by Gender UK
Men have a substantially higher level than women when it comes to carrying debt. Men have an average of £2,800 in personal financial debt (excluding mortgages), but women have a 36% lower average of £1,800. Men and women are equally likely to have any financial obligations, with both genders accounting for 35% of all outstanding debts. Men and women have similar debt-to-income ratios of 0.16 and 0.15, respectively, which is a rather stable level.
While men are much more likely to have debt than women, women are perceived to be less confident and informed about financial services than men and therefore are more unlikely to be carrying debt.
The Financial Lives survey from the FCA invites people to rate themselves on a variety of confidence and risk factors.
The graph below depicts the percentage of persons who rate themselves as low (0-6 on a scale of 0-10) or who agree or disagree with various claims.
Source: FCA, Financial Lives Survey 2020
The results demonstrate that men and women had similar levels of dissatisfaction with their own financial circumstances. However, there are some notable differences in their levels of risk aversion and confidence in financial affairs, including:
Men are more at ease when it comes to interacting with financial services than women.
Women are more likely than males to report they lack confidence in their ability to manage money or understand financial issues.
Women seem to be more risk conservative in their financial management.
The average UK household savings rate is a huge concern.
Why Is This Worrying?
A lack of savings is worrying because this is one thing that can contribute to debt problems and increase the average personal debt in the UK. Debt can greatly impact your financial wellbeing.
Many people get into debt because they lose their job unexpectedly or have an unforeseen bigger expense to make, such as purchasing a new washing machine or a car repair.
With no savings to fall back on during these periods, they enter into new debt or cannot pay existing lenders the money they owe, making their debt materialise.
On top of that, high levels of debt can lead to stress and anxiety, which can further exacerbate the debt problem. Data shows thatpeople with recent mental health issues are three times more likely to be behind on at least one key bill (e.g. energy, rent or credit card).
As you can see, your debt can vary depending on your age, where you live, your type of debt, and your gender. If you are in debt, you can still get out of it and become free. And you don’t have to figure it out yourself.
We’ve put together lots of useful in-depth articles and resources that will help you understand the ins and outs of your debt and help you get back onto your feet.
The numbers might be worrying, and your personal debt may keep you awake at night, but help is available. There are various debt relief solutions for those struggling with debt in the UK. I suggest you explore the following options:
Debt Management Plan (DMP): This helps you repay your debt by making affordable monthly payments.
Debt Relief Order (DRO): You can use a DRO to write off your debt if you have a low income and few assets to sell.
Individual Voluntary Arrangement (IVA): An IVA lets you pay a reduced amount over a fixed period of time.
Breathing Space scheme: If eligible, you could get 60 days break from interest, fees and court action by applying for the Breathing Space scheme (only available in England and Wales).
Bankruptcy: This will clear your unmanageable debts in England, Wales and Northern Ireland only.
Sequestration: If you live in Scotland, you could write off debts you can’t pay in a reasonable time through sequestration (Scottish bankruptcy).
Minimum Asset Process: This solution is for people in Scotland with a low income and not many assets to dispose of to pay off their debts.
Debt Arrangement Scheme: Also available in Scotland, DAS helps you make affordable payments until your debt is settled.
Token Payment Plan (TPP): A token payment plan lets you pay a reduced amount temporarily as you sort your finances in order.
Now let’s look at where you can go when for help when you feel like you’re drowning in personal debt in the UK:
#1: Debt Charities
UK debt charities are free for debtors to contact and receive credit counselling. They have a team of advisors who will help you know what the people you owe money can and can’t do when chasing you for payments. But even better, they will help you identify ways to gradually get out of debt.
And these solutions will stop any legal threats you might have received, such as bailiff.s
The only drawback with using debt charities is that they might not offer free debt solutions themselves.
They can try to help you draft a Debt Management Plan, but it is so rare that they get you an IVA, DRO, or bankruptcy. However, it’s important to get free and impartial debt advice from a debt charity before going ahead with any of these debt solutions.
#2: Debt Management Companies
If an IVA or other formal debt solution is more advantageous to you – it might save you money and wipe off as much as 85% of your debt – then you will need the help of an insolvency practitioner. These are professionals who can help arrange legally-binding debt solutions. These services cost money, but you can save in the long run.
Sometimes personal insolvency practitioners are also employed within accountancy firms and financial advice companies to support clients.
#3: Online Forums and Websites
Another source of support and help is found on online debtor forums and free finance websites. For example, there are numerous IVA forums for people who are considering this debt solution or are already on an IVA and want help from an educated community.
The Money Nerd website is also full of helpful financial information that has been simplified for everyone to understand. Our debt management company reviews are especially useful in helping people choose a reputable company to provide them with personal debt solutions.
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
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