“A new generation of young people are starting out with stifling levels of debt”, warns Citizens Advice chief executive Gillian Guy, as a report reveals that more than 100,000 people between the ages of 17 and 24 have approached Citizens Advice with debt issues in the past year.
The report “Unsecured and insecure?” explores “the UK’s mountain of unsecured personal debt and how it affects people’s lives”. It’s not only young people’s lives – the other two groups showing signs of problem debt are single households and those with few assets. Unsecured debt is growing faster than secured debt and faster than incomes.
The average debt to income ratio for young people is nearly 70%, compared to 34% for 25 to 29-year-olds, and 11% for 60 to 64-year-olds.
Youth in Debt Statistics
Young people now have an average unsecured debt of £12,215. They are disproportionately likely to have telephone and broadband debts and serious debt problems including Debt Relief Orders and Magistrate’s Court Fines.
Student loans account for only 45% of the debt rise among young people – the rest is bank and payday loans as well as borrowing from friends and family.
Citizens Advice reports that they are now seeing half the number of payday loan problems as in the first quarter of 2015 as the payday loan industry has been forced to clean up its act. But the downside is that people are turning to other forms of borrowing to fill the gap, including high cost credit, log book loans and guarantor loans.
Most unsecured borrowing is on credit cards or with personal loans but the way that debt is shifting is indicative of a worrying trend where people are getting into arrears with basics such as the council tax. People in control of their finances generally make sure that they pay the important bills first; going into arrears is an indication that they are struggling.
A debt consolidation loan may help.