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Furloughed workers forced to take out loans to survive pandemic

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People on furlough have had to turn to credit cards, borrowed from family and friends, or even remortgaged their home during the pandemic, research shows.

A survey by Canada Life found 44 per cent of furloughed workers have borrowed money on credit cards or considered doing so to boost their income.

Some 42 per cent have borrowed or considered borrowing from family and friends and 41 per cent have or have considered taking out a loan.

More than a third (34 per cent) have remortgaged or have considered remortgaging their property to unlock additional income. Younger workers are most likely to have remortgaged, with 49 per cent of 18–34-year-olds having considered it or done so, compared to 36 per cent of 35–54-year-olds, and just 5 per cent of those aged 55 and over.

The government’s furlough scheme – formally called the Coronavirus Job Retention Scheme – is due to be wound up on 30 September. It protected millions of jobs during the pandemic.

However, there are fears the end of the scheme could lead to job losses and higher household debt.

The number of people furloughed stood at 1.6 million as of 31 July – down 340,000 from almost two million at the end of June and a peak of nearly nine million at the height of the pandemic in May last year.

Alice Watson, head of marketing, insurance at Canada Life, said: “The furlough scheme has provided much-needed support to millions of workers across the country. However, with fragile finances, many have had to consider other sources of income to boost their incomes, whether that be turning to friends and family, looking at forms of credit or accessing the wealth from property.

“As we navigate through the pandemic, it is likely many people will feel additional financial strain as the furlough scheme draws to close this month.

“Property wealth is playing an increasingly important role in financial plans. Anyone considering accessing their property wealth should speak to a financial adviser, whether that be remortgaging or equity release.”

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