Poorest Households Among Hardest Hit by Problem Debts

January 16, 2018

Many of the poorest households around the UK are struggling to cope with their debts and the burden of making repayments on credit cards and personal loans each month.

According to a report from the Institute for Fiscal Studies (IFS), while there are a great many Brits who can comfortably afford to service their debts, there are also many thousands of families and individuals for whom outstanding debts are a very significant problem.

The organisation’s research found that roughly a sixth of people in the lowest income bracket are currently in arrears with creditors or with service providers or a combination of both.

Meanwhile, a further 10 per cent of people in the lowest income bracket are understood to be paying out more than a quarter of their monthly income on unsecured debt repayments.

The IFS’ investigations, carried out on behalf of the Joseph Rowntree Foundation, also found evidence to confirm that debt problems are particularly difficult to escape for people whose incomes are below average.

The institute’s figures suggest that 40 per cent of people with low incomes who were spending more than a quarter of their income on debts between 2010 and 2012 were still in much the same position two years later.

For the most part, problem debt situations tend to arise because an individual has decided to take on more debt and not because they’ve become less able to service their debts as a result of a sudden drop in income, the IFS’ research suggests.

“Most unsecured debt is held by high income households who look able to manage it, and more than half of those with debts have enough financial assets to pay them off,” said David Sturrock from the IFS, who co-authored the recent report.

“But debt looks like a real problem for a significant minority of those on low incomes, who are not keeping up with bills and/or spending high fractions of their disposable income on debt repayment.”

Scotland Debt Solutions has offices in four Scottish cities and we provide comprehensive expert guidance on dealing with problem debt situations. Contact any of our offices directly to arrange a FREE and confidential consultation.

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