27 Nov 2013

Nine million adults ‘unable to escape the debt spiral’

Nearly nine million people in the UK are estimated to be trapped in a spiral of severe debt, not knowing where to seek advice, experts warn.

Around 8.8m people are “over-indebted”, meaning they have fallen at least three months behind with their bills in the last six months or they feel their debts are a heavy burden.

Read more: UK debt crisis: poorest face 'perfect storm'

But just 17 per cent of this group said they are getting advice to help them deal with their debt, while around two-fifths (40 per cent) said they did not feel able to talk to their creditors and 44 per cent did not know where to turn for help, the research from more than 5,000 people found.

Meanwhile, around one fifth (21 per cent) of those the research classed as over-indebted, equating to 1.8 million people across the UK, did not recognise that they had a problem.

Seeking advice

Caroline Rookes, CEO of the MAS, said: “Millions of people could escape their spiral of debt by accessing free advice.

“However, this study presents us with a fundamental challenge: the majority of people with debt difficulties do not seek advice.

“This is the first time we’ve had such a detailed understanding of the complexity of their lives. So now, armed with greater insights, we will work with advice agencies, creditors and public bodies to help as many people as possible access free, high-quality, debt advice.”

A further 11 per cent were not concerned about being in debt, the report, titled Indebted Lives, found. One in eight (12 per cent) over-indebted people said they were thinking about trying to get help soon.

Over-indebted areas

The report also identified the UK’s five most over-indebted areas as Hull, Nottingham, Manchester, Knowsley and Liverpool. Around two-fifths of adults in all these areas are struggling with debt.

At the other end of the scale, Richmond upon Thames in south London has just 1.2 per cent of its population struggling with debt, the report found.

Three-quarters (75 per cent) of the estimated 8.8m people with severe debt problems are under 45 years old and nearly two-thirds (64 per cent) are women.

Some 74 per cent of those with severe debt problems said they are unhappy and 83 per cent wanted to claw their way back into financial health as soon as possible.

Around four million people are thought to have been struggling to pay their bills for more than a year and just under half (48 per cent) of those with severe debt had to forego basic necessities.

Families on benefits

The report used information from credit checking company Experian to build a profile of those who have sunk badly into debt.

Families dependent on benefits made up around one fifth (20.2 per cent) of those who are over-indebted, while “worried” working families who find being in debt a constant burden accounted for a similar proportion (19.4 per cent).

Nearly one in 10 (9.8 per cent) of those with bad debts were identified as people who are working for the first time and one in eight (11.3%) are struggling students. Some 1.1% of this group are people eking out an uncomfortable retirement.

Almost three-fifths (58 per cent) of those with severe debts were found to be in employment and nearly half (48 per cent) live in a privately-owned home.

People in this group have the most divergent views about seeking advice. While one fifth are currently getting advice, nearly one third (30%) cannot see themselves ever getting advice.

For many older people in this group, there is a shame, stigma or feeling of guilt associated with being over-indebted and they will be more reluctant to reach out for help, the report said.

But offering them generic advice about how to make the most of their money may appeal to them.