Consumers Face Unbearable Debt Problems

A number of Britons report that their debt problems are causing them difficulties in other areas of their life, according to a new study.

In research carried out by R3 - the Association of Business Recovery Professionals - one out of six consumers are said to be unable to manage with repayments on secured loans and credit cards. Of those struggling the most with their day-to-day finances, 21 per cent of respondents were reported to have encountered debt problems as a result of becoming ill, with a third (33 per cent) highlighting redundancy as the source of their monetary difficulties.

The study also indicated that more than half of 18 to 24-year-olds are servicing student debt repayments, with this proportion falling to one in three of 25 to 34-year-olds still paying off money owed from their time in higher education. Meanwhile, the majority of respondents claim that increasing availability of credit, overspending and a "buy now" desire to make major purchases such as cars and foreign holidays were said to be the driving factors behind the "meteoric rise" in Britain's debt management problems.

Commenting on the index, R3 president and insolvency lawyer Patricia Godfrey said: "Our members see the misery that high levels of debt can cause, as it is our insolvency practitioners who pick up the pieces when the debt becomes unbearable. What we will be producing here is a barometer of the increasing indebtedness across Britain. It will provide us with an important insight into the underlying causes of the burden of debt and changing attitudes towards it".

The study forms part of a national YouGov survey, sponsored by R3, examining Britons' attitudes to borrowing. Every three months members of the public will be questioned about levels of personal debt, in addition to money owed via secured loans. How much credit consumers are in will then be weighed against the average personal income.

Previous research by R3 recently indicated that borrowers in the north-west of England could have the highest debt difficulties in the country. The news comes after some 10,161 consumers in the region went bankrupt over the 12 months leading up to March as they struggled to handle their finances and pay off personal loans - a rate of about 30 people per day. Meanwhile, the south-west was said to have come a "close second" in terms of developing unmanageable financial problems, with London residents (7,209) reported to have the lowest insolvency problems.

Ms Godfrey claimed that as the number of those filing for bankruptcy reached a record high last year more Britons could be set to struggle with their finances as the "use of credit continues to rise" and the Bank of England increases interest rates. She added that as consumers continue to feel the impact of rising house prices and a surge in the general cost of living, those who are themselves unable to meet their credit commitments are advised to seek professional advice as soon as possible. "These situations are manageable if the debtor doesn't stick his or her head in the sand and deals with it head on", the president added.