Personal Debt in the UK: A Comprehensive Guide 2024 (2024)

Personal debt is a term that is used to describe the amount of money owed by an individual. Their debt pool can contain various debts. It can include credit card debt, mortgage, financing, or even unsecured debt.

As of June of 2023, the average personal debt in the UK has reached £34597 for adults and £65529 for households. As you can see, average personal debt has significantly risen by £1187 since 2022.

According to the data from August 2023, the United Kingdom’s aggregate interest payments on individual debts for a span of 12 months were projected to reach £67,313 million, averaging £184 million daily.

Additionally, the average amount of unsecured debt in the UK has surged to an astonishing £4,087.

We’ve analysed statistics sourced from the Office of National Statistics and The Commons Library to discern patterns and shifts in UK personal spending habits. However, what is driving the rise in these figures?

To gain a deeper understanding, let’s examine some UK debt statistics from recent years.

Table of Contents

MORE
LESS

In today’s economic climate, understanding the concept of “average debt in the UK” is crucial for grasping the broader financial challenges faced by individuals and households. As we navigate through an era marked by fluctuating economic conditions, the average debt in the UK serves as a key indicator of financial health and stability.

This article aims to shed light on the intricacies of personal debt in the UK, exploring its causes, current status, and the support systems available to those grappling with debt. By delving into these aspects, we gain a clearer picture of the average debt landscape and the steps one can take towards financial resilience.

UK Personal Debt Statistics

Here are some facts about average debt in the UK:[source]

• Total debt in the UK reached £1846.5 billion by the end of August 2023.
• This marked an increase of £35.1 billion from £1,811.4 billion in August 2022. It equates to an additional £660 per UK adult over the year.
• The average total household debt, including mortgages, stood at £65,756.
• Per adult, this amounted to £34,716, approximately 100.4% of average earnings, a slight decrease from the revised figure of £34,668 a month earlier.
• Based on August 2023 data, the UK’s total interest payments on personal debt over 12 months were projected to be £67,313 million, averaging £184 million per day.
• The average annual interest per household would have been £2,397 and £1,266 per person, representing 3.66% of average earnings.
• According to the Office for Budget Responsibility’s March 2023 forecast, household debt of all types was expected to rise from £2,333 billion in 2023 to £2,478 billion in 2025. This would make the average total household debt £86,994 (assuming household numbers track ONS population projections).
• As of the end of August 2023, outstanding consumer credit lending reached £217.4 billion, increasing by £1.3 billion from the revised total for the previous month.
• Within this total, outstanding credit card debt amounted to £67.3 billion, reflecting an 8.00% increase in the year to August 2023. Credit card debt averaged £2,394 per household and £1,264 per adult.
• A credit card with average interest would take 26 years and 5 months to repay, making only the legal minimum payments each month.
• The minimum repayment in the first month would be £67 but would decrease each subsequent month. If £67 were paid every month, the debt would be cleared in 4 years and 11 months.
• Total net lending to individuals and housing associations by UK banks and building societies increased by £2.6 billion in August 2023. It is equivalent to £83 million per day over revised figures for July 2023.
• Net mortgage lending increased by £1.3 billion in the month. Yet, net consumer credit lending increased by £490 million.
• In Q2 2023, lenders in the UK wrote off £710 million. Here, £282 million is attributed to credit card debt, Hence resulting in a daily write-off of £3.1 million.

Let us discuss why people in the UK end up piling up their debts to this extent.

Need more Help to deal with your debts?

If you’re unsure how to deal with your debts, feel free to fill out our online form, and our Money Advisor Team will get back to you to guide you.

What Is the Biggest Cause of Debt in the UK?

We cannot exactly pinpoint in default the reason why people get into debt. It is because their debt issues are unique in a way to themselves. However, it is a known fact that most people in the UK get into debt due to the rise of unexpected expenses or loss of their incomes.

Plus, they end up in these situations due to a lack of financial literacy and overspending.

Roughly half of the reasons behind individuals falling into debt in the UK included factors such as

Moreover, between July and September 2023, England and Wales collectively declared bankruptcy or insolvency for 262 individuals every day. This is equivalent to one person every 5 minutes and 30 seconds.

The pandemic played a significant role in contributing to unemployment and redundancies, with many still-employed individuals placed on furlough to supplement their income. This resulted in a challenging economic situation for the UK, leading to a considerable rise in government debt as millions nationwide relied on furlough.

To cope with essential monthly payments, many families inevitably turned to borrowing from credit lenders.

A considerable number of people in England and Wales found themselves stretched beyond their financial means despite these circ*mstances. Nevertheless, it is important to acknowledge that other factors also contribute to individuals falling into debt.

So How Much Debt Are People Really In?

When we examine the magnitude of debt among UK households, the numbers are quite revealing. On average, personal loan debt per household exceeds £5,000. But that’s just the tip of the iceberg.

• Average Personal Loan Debt: Over £5,000 per household.
• Comprehensive Household Debt: £10,145 per household, including student loans.

This figure encompasses various types of debts, such as personal loans, home improvement loans, and vehicle loans. With the rise in average credit card debt, personal loans have become increasingly common for financing various needs.
Since the 2008 financial crisis, household debt skyrocketed from 85% to 148%. Additionally, the reluctance of banks to lend during this period significantly affected debt-to-income ratios.

Looking ahead, the Office for Budget Responsibility predicts a further increase. The household debt-to-income ratio is expected to reach 150% by early 2024. Stay with us as we explore the implications of this rising debt trend.

How Many People Have Debt Products?

Over 51% of UK adults have used consumer credit in the past year. This widespread reliance on debt products like credit cards and overdrafts suggests a substantial dependency on borrowed money for day-to-day living. This trend raises serious concerns about the average debt per person in the UK and the long-term financial health of these individuals.

Your personal debt can exist in various forms. Most likely, your debts are a mixture of the following:

Not surprisingly, mortgages constitute the most significant portion of total debt. And it is approximately one-third of UK households holding a mortgage.

Has the Average Personal UK Debt Increased?

Yes, the trajectory of personal debt in the UK is indeed on the rise. Since late 2019, there has been an increase of £498 in debt per adult. This growth in average debt in the UK reflects broader economic challenges and changing consumer habits.

Debt by Age Group UK

Age is a significant factor in debt accumulation. Young adults, especially those between 18 and 34 years old, face the highest levels of non-mortgage debt, averaging around £10,400. This demographic is often burdened with student loans, early career challenges, and the pressures of establishing independent households.

However, individuals aged 75 and above carry the smallest average credit card debt and household debt, amounting to £4,400.

In general, individuals between the ages of 25 and 44 are the most inclined to possess consumer credit(with 71% of those aged 25-34 having such credit) in contrast to just 20% of those aged 65 and older. You can learn more facts by referring to the Financial Lives Survey 2023 that generated by FCA.

But what can these younger age groups do to manage and reduce their debt effectively?

Debt by Region UK

The average personal debt in the UK varies considerably by region. Areas with larger cities and higher living costs(such as London) exhibit higher levels of debt. This regional variation in debt levels is influenced by differences in income, housing costs, and job opportunities.

You can study further by referring to helpful tables from the House of Commons Library, compiled by the FCA. Those tables illustrate the variations in average debt by region among individuals with a mortgage, those with a student loan, and those without any debt.

Hence, regions with major cities and the capital exhibit considerably higher average personal debt compared to less densely populated areas in the country.

Keep reading. There are plenty of new facts to learn.

Debt by Gender UK

Gender disparities in debt are notable. Men, on average, carry higher levels of personal financial debt than women. This disparity raises questions about differing financial behaviours and attitudes toward money management between genders.

On average, men carry £2,800 in personal financial debt (excluding mortgages), while women have a 36% lower average of £1,800. Both men and women are equally likely to have any financial debts. Each of them represents nearly 35% of all outstanding debts.

The debt-to-income ratios for men and women are comparable at 0.16 and 0.15. Respectively, this indicates a relatively stable level.

There exists a perception that women are less likely to be in debt while men are more prone to carrying debt than women. It’s because they are being perceived as less confident and informed about financial services.

According to the Financial Lives survey by the FCA, individuals were asked to assess themselves on various confidence and risk factors.

Yes, it is a true fact that men and women express similar levels of dissatisfaction with their financial circ*mstances. However, significant differences emerge in their levels of risk aversion and confidence in financial matters:

You can verify this data by going to the Financial Lives survey by the FCA.

How Much Are We Saving?

The average savings rate in the UK paints a grim picture. With many households having less than £1,500 in savings, the cushion against financial shocks is minimal. This scarcity of savings contributes significantly to the rise in average personal debt in the UK.

Why Is This Worrying?

The absence of savings is a concerning issue, particularly because it contributes to debt challenges and amplifies the average personal debt in the UK. Additionally, it’s a well-known fact that lack of savings affects the financial well-being of the community.

The UK community faces the risk of increased personal debt as a result of unforeseen circ*mstances such as sudden job loss or unexpected major expenses like replacing a washing machine or repairing a car.

In the absence of savings to buffer against such situations, individuals often resort to accumulating new debt or struggling to meet existing financial obligations. Hence causing their debt to escalate.

Furthermore, elevated levels of debt not only strain financial health but also give rise to stress and anxiety, creating a detrimental cycle.

Additionally, elevated levels of debt can induce stress and anxiety. Hence further compounding the existing debt issue.

Data indicates that individuals with recent mental health issues are three times more likely to fall behind on essential bills such as energy, rent, or credit card payments. These facts underscore the interconnected challenges of debt and mental well-being within the UK community.

What Support Is Available for UK Debtors to manage their Personal Debt?

Sometimes, you may face difficulties in agreeing to the proposed payment plans from your original creditor or Debt Collection Agency, especially if they are financially burdensome.

In such situations, it is advisable to explore alternative debt solutions that can effectively address your debt-related concerns. In the UK, there are various alternative debt solutions to consider.

However, it’s crucial to keep in mind that each of these debt solutions has specific eligibility criteria. Selecting the right one can lead to debt resolution while choosing the wrong one could worsen your financial circ*mstances.

Hence, seeking guidance from a professional debt advisor is a prudent step to take if you find it challenging to determine the most suitable debt solution on your own.

Here are some key debt solutions available in the UK:

Alternatively,

If you need personalised assistance based on your current financial situation, please feel free to complete our online form by clicking here to receive help from our Money Advisor Team.

Debt charities are here to help!

If the complexities of debt have you feeling cornered, remember there’s always help available. Organisations like National Debtline and StepChange provide stellar support to those in need.

Empower yourself with knowledge and seek assistance when needed. You’re never alone in this.

Should You Check For Other Debt Collectors?

You need to be aware of other unsettled debts you have with other companies or debt collectors. Here is a summarised breakthrough for you to follow and track your debts.

1.Identify Outstanding Debts:

Ensure you’re not overlooking any debts. Here’s how:

• Credit Report: Examine it for any defaults.
• Communications: Peruse emails and postal reminders or overdue notices.
• Legal Stand: Look up court records for CCJs you might have.
• Bank Statements: Search for unfamiliar names that might be debt collectors.

2.Know Your Debt Collectors:

Hundreds operate in the UK, each associated with diverse companies.

• Cabot Financial: Often associated with the DVLA.
• Lowell Financial & PRA Group: Famously acquire debts from credit card giants like Barclaycard.

Summary:

Being contacted by your creditors can be unsettling, but don’t panic. They can be persistent, so it’s best to stay calm, be informed, and get everything in writing. Remember, there are several ways to handle your debt situation, even if repayment seems out of reach. Being informed and prepared is your best defence.

Key Points

UK Personal Debt Statistics
• Total population debt: £1.698.4 billion.
• Average debt per adult: £33,410.
• Predicted increase in household debt by 2025: £2.354 billion.
Biggest Causes of Debt in the UK
• Main factors: Loss of income, unexpected expenses, overspending, poor financial literacy.
• 50% of debt cases are due to unemployment or reduced income.
Current Debt Situation
• Average personal loan debt: Over £5,000 per household.
• Total household debt including, student loans: £10,145.
• Increase in household debt since the 2008 financial crisis: From 85% to 148%.
Available Support for UK Debtors
Many people in the UK have managed to write off some portion of their debts.
• Debt relief solutions include DMP, DRO, IVA, Breathing Space scheme and Bankruptcy.
• Debt charities offer free advice and credit counselling.
• Debt management companies and insolvency practitioners for formal debt solutions.
• Online resources like forums and websites for community support and financial education.