OVER half of Brits are in debt with the poorest 10 per cent of households borrowing cash just to pay for day-today livings cost, according to new research
Latest figures from Sky News and the Resolution Foundation show that households in poverty spend 34 per cent of their income on paying back debts, compared to just 8 per cent on average.
Tthe Bank of England found that in 2018, 54 per cent of people had unpaid debt but it’s the those with the lowest income that are worst hit.
One third of families with the lowest income are struggling to keep up with the repayments.
The research found that the poorest households’ debt is almost half of their annual income – on average they’re left with £3,510 after debts worth £3,120 have been taken in to account.
This is substantially more compared to the UK average household which is typically left with £39,250 from their annual income after their £3,950 has been removed.
How to cut the cost of your debt
HAVING large amounts of debt can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money.
Work out your budget – by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.
Pay off more than the minimum – If you’ve got credit card debts, aim to pay off more than the minimum amount each month to bring down your bill quicker.
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay the balance off in full each month, prioritise the most expensive card (the one with the highest interest rate).
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay.
Get free advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups such as Citizens Advice and National Debtline offer free advice and can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
It’s not just Brits on benefits that are affected either, as the research found working families are also running out of money every month.
Households with high-levels of existing debts struggling to make ends meet are often left with no alternative but to turn to high-cost lenders for extra cash.
While these firms will lend to borrowers with a poor credit history, rip-off rates means Brits often fail to meet the repayment demands causing their debts to spiral out of control.
The new stats also showed that many homes can’t survive without relying on credit but the difference is that higher earning households can borrow money from a bank with lower, more affordable rates.
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This is called the poverty premium where those in financial hardship end up paying more when they seek to get help by borrowing cash.
The figures are part of a broader piece of research by the Resolution Foundation that looks into UK debts due to be published in the next few months.
Last year, The Sun launched the Stop The Credit Rip-Off campaign to help the millions of families who fall prey to doorstep lenders and legal high street loan sharks.
Banks are set to be banned from charging rip-off unarranged overdraft fees in a high-cost credit crackdown by the industry watchdog.
In May, we revealed how overdraft fees can cost MORE than a payday loan.
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