Personal debt more than doubles in last 12 months

The figures have been revealed in money.co.uk’s annual debt index, following extensive research by the comparison site into household debt across the UK. 

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What we found 

Around six in ten (59.7%) consumers admitted to being in debt right now, not counting mortgages, with the average amount owed in the UK in 2021 coming in at £25,879 per person - more than double the figure in 2020 (£9,246).

Almost a third (32.24%) of debt incurred this year has been due to living expenses such as bills and food, down from 35% last year, while the coronavirus pandemic accounted for another 31.74%, down from 36% in 2020. 

Notably, the number of people citing redundancy as a result of coronavirus as the reason for their debt has jumped from 7.8% last year, to 9.72% in 2021, which is a possible outcome of the furlough scheme coming to an end on September 30. 

The data reveals that men (£35,013) have more than twice the debt of women (£14,911), while Brits aged between 35-44 have more debt than any other age group, averaging £53,283 per person.

According to the figures, COVID-19 continues to account for a large amount of personal debt, with the average Brit attributing £19,203 of their deficit to loss of earnings as a result of the pandemic.

When it comes to alternative causes of debt, almost two thirds of people (63.98%) blamed living expenses and the pandemic for their debt in 2021, and more than one in five (21.86%) attributed their losses to the expenditure of Christmas 2021. 

James Andrews, senior personal finance editor at money.co.uk, said: “Given the challenges faced by consumers in the past 12 months, it’s no surprise personal debt is high, but for it to more than double in a year to £25,879 a person is extreme. 

“Almost two years on, nearly a third of consumers still attribute their losses to the pandemic, while a fraction more say that living costs are the main cause of their debt. This will come as no surprise to anyone who has tried to change their gas or electricity supplier or filled up their car in the past few months; prices are at an all time high and show no signs of dropping in the foreseeable future.

“If you’re struggling with multiple types of debt, putting the most important debts first is key. Missing repayments on secured debts, such as a mortgage, may result in your home being repossessed while not paying council tax can result in you being put in prison. These should be top of the list.

“If you would like help prioritising, or are struggling to meet payments, there are free services available that will help you review your finances. Citizens Advice will offer free, impartial advice, or alternatively you can contact a debt charity like Step Change who will be able to offer support.” 

Regional breakdowns 

We’ve also found key differences in the levels of debt incurred across different regions in Britain, with almost three quarters (72.62%) of people in the Greater London region ending 2021 in debt, more than any other area in the UK. Londoners also have the highest level of personal debt in the country, a staggering £53,960 per person. 

The coronavirus pandemic continued to negatively affect peoples’ finances in the capital, with more than one in five residents (21.99%) saying their debt was directly due to furlough, a scheme to support wages which ended in September. 

A further 14.14% said redundancy as a result of coronavirus was to blame, while an additional 11.39% of residents cited coronavirus generally as the reason for their losses. In total, Londoners reported that  £42,927 of their current debt has arisen as a result of loss of earnings during the COVID-19 pandemic. 

When it comes to individual UK cities, more people in Belfast are ending 2021 in debt than any other place (67.86%), however they do have the lowest average debt figure per person at £6,381. The city with the greatest debt per person is Southampton, where residents have average losses of a whopping £62,301. 

Residents of Southampton said a huge £42,927 of their debt has arisen as a result of loss of earnings during the COVID-19 pandemic, adding that normal living expenses (38%) Christmas 2021 (22%) and debt consolidation (22%) were also to blame for their losses. 

Average amount of personal debt by city

New Year, New Debt 

Almost six in ten Brits (59.7%) are set to end 2021 in debt, according to the research.

The study of British adults commissioned by money.co.uk in December 2021 shows that the average person will end 2021 with £25,879 worth of total debt – up a staggering 179.9% compared to the 2020 average of £9,246.

Almost a third of respondents (31.12%) said they took out at least one additional credit card or loan in the past year to pay off debt incurred due to the COVID-19. Meanwhile the average credit card debt is now £3,276, up from £2,465 last year.

Just over half (50.1%) of people said they were in a worse financial position entering 2021 than they were in 12 months previously. A majority of younger people said their finances had improved over the past 12 months, while those aged 45+ reported worsening finances. 

When it comes to managing debt over time, the average consumer has been in debt for just over two years, and it will take an average of three years to pay it off completely, with the average Brit spending up to 20% of their wage on repaying their debt.

What type of debt are we ending the year with?

More than three in ten of Brits (31.75%) attributed their debt to credit cards, which is down from 34.47% last year. 

Personal loans (15.60%), overdrafts (14.15%), car loans (10.95%) and white goods payment plans (10.35%) were the other most common types of debt that Brits ended 2021 with. 

Meanwhile Payday loans and product payment plans accounted for 27.45% of debt, according to the statistics. 

Buy Now, Pay Later debt has also soared in 2021.

If you are worried about your debts, it’s really important to get free impartial advice, don’t pay for it. StepChange is the UK’s leading debt charity and their experts can give free advice and support to help you get back on track with your finances.

More support and resources 

The following debt charities can also offer you independent advice and support. Some can also help you set up a free DMP:

• Citizens Advice can provide free help in person or by phone

• StepChange Debt Charity can provide advice or a free DMP

• National Debtline can offer free advice by phone and help you set up a free DMP

• PayPlan is an independent provider of free DMPs

• Shelter is a housing charity that can provide advice by phone, online or in person

• Christians Against Poverty can visit you at home to give advice and help you budget

The government-run Money Advice Service offers some simple steps to help with your debts. 

We have also created a collection of guides that can help you answer your money-related questions during the coronavirus pandemic:

• Coronavirus: Overdraft changes and help available to bank customers

• Where to go for financial advice

• Coronavirus: Getting your retirement savings back on track

• Ten tips for budgeting during coronavirus lockdown

Methodology

The personal finance experts at money.co.uk surveyed over 2,000 UK adults in December 2021 with research partner Censuswide.