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Credit Cards & Loans

Almost 60% borrow to pay for essentials

Kit Klarenberg
Written By:
Kit Klarenberg

There has been a sharp rise in the number of people borrowing money to pay for food, rent and utility bills over the past six months, according to the Debt Advisory Centre.

Its latest Financial Wellbeing Survey found that  57 per cent of respondents had been forced to rely on credit to cover grocery bills, rent, mortgage payments, or water, gas or electricity bills.

Looking at overall financial well-being, 30 per cent classified themselves as ‘struggling’, and 20 per cent said their financial wellbeing is ‘worse’ now compared with a year ago. Conversely, 25 per cent said they are now more comfortable than they were a year ago.

The increasing struggle consumers face to afford grocery bills comes despite fierce competition among supermarkets and deflation combining to produce a decline in food prices over the past year. Almost a quarter of consumers said they borrowed to buy food between April and September – double the number who borrowed to buy food in the six months ending 31 March.

Similarly, falling oil prices and garage forecourt competition has pushed down the cost of petrol by 15 per cent, but 10 per cent of consumers currently pay for fuel and their car insurance using credit.

The high cost of gas, electricity and water bills has left 13 per cent of consumers (8.3m people) with utility bill arrears of between one and three months. The same number of people say they have rent or mortgage arrears.

The use of credit to pay for essentials has been deemed troubling by Debt Advisory Centre, as the findings suggest many consumers are struggling to repay credit liabilities. Up to 15 per cent are three months in arrears on their credit cards, and a further 22 per cent have fallen behind with payments on a store card or loan.

The ways some consumers said they would deal with an inability to meet repayments and deal with debt were also highlighted as particularly worrying, with 11 per cent saying they would borrow additional money in both instances, and 12 per cent saying they would either delay paying essential bills to make repayments, or simply avoid the companies they owed money to until they were able to make payments. Only 30 per cent of consumers said they would seek independent advice to help them to manage their debts.

“The Financial Well-being Survey shows an alarming jump in the number of people who are struggling to pay for the basics from their regular incomes and so are being forced into a cycle of borrowing,” said Melanie Taylor, Debt Advisory Centre spokesperson.

“While unemployment is falling and some companies have increased salaries ahead of the introduction of the Living Wage, there are still too many people with low or fluctuating incomes who live in fear of the next bill coming through the letter box.

“The last thing we want consumers to do is to pay for their essential bills, such as their mortgage or a gas bill, using credit. The first step out of this cycle is to do a workable budget, which prioritises household bills, and then to be ruthless in sticking to it.

“If anyone finds their income isn’t stretching to meet their bills, I would urge them not to borrow money, but instead seek advice from the Money Advice Service or elsewhere. For people with problem debt, don’t ignore it. It’s important to get support before the debt starts to spiral.”