The past 12 months have had us all confined to our homes throughout the on-off coronavirus lockdowns. With Brits being furloughed and losing work entirely, the global pandemic has caused monumental damage to our household finances. A YouGov survey conducted by Debt Movement has shown a dramatic rise in problem debt. In a survey of 1,000 respondents, more than one in twenty households suffer from unmanageable debt. This shows a shocking 50% rise since 2018, as shown in a survey conducted by ONS.
At the beginning of 2020, no one could have predicted that the pandemic would go on for as long as it has or how severely businesses and employees would be affected. Over 11% of new debt in 2020 is down to workers being furloughed and suddenly having to live on reduced incomes. New statistics from Debt Movement’s survey show that millions of people have begun to struggle with this debt and are now in a position where they are unable to meet repayments.
Which Debts Are Affecting Us Most?
Families’ lives have been turned upside down by the sudden reduction in their income, with some households losing their main income entirely, while others are having to survive on a hugely reduced amount. This has meant that monthly financial obligations have become difficult to meet, with payments to existing lenders being missed leading to defaulted accounts.
Getting into this kind of problem debt can be devastating. Problem debt is usually defined as debt that has become a monthly burden on a person or household’s finances. Often, people with problem debt find themselves struggling to make repayments and fall behind to the point that their lenders are taking further action to recover the money owed to them. This can be a worrying time and can often lead to people taking out further loans to repay their existing debt — this is referred to as the “debt spiral”.
Being in unmanageable debt can take its toll on our mental health and relationships. Finding the right guidance and support is crucial to those who are struggling to repay debts or have become stuck in the debt spiral.
Where Will the Future Take Us?
Employment problems may not be over just yet. On 8th May 2020, there were almost 9 million people furloughed and living on a reduced income. By October 2020, there were still 2.4 million people furloughed. With businesses unable to survive the economic crisis, the Office for Budget Responsibility predicts that around 2.2 million people will be unemployed by the end of 2021. The recent YouGov survey shows that this could put a further 33% of Brits at risk of falling into problem debt.
The furlough scheme and self-employment income support scheme (SEISS) were put in place by the government to help retain employment throughout the coronavirus crisis. However, for those whose finances were already on the threshold of being unable to manage, this seemingly small income change has made a huge impact.
Debt Movement’s Chief Executive Officer and Licensed Insolvency Practitioner, Laura Prescott states that “problem debt is another devastating consequence of the pandemic for some individuals. Those who were previously just about managing have been pushed into unaffordable debt for various reasons and many are finding it difficult to bounce back.”
How Can Debt Movement Help?
When debt is unmanageable, there are debt solutions that can help you to regain control of your finances – from debt consolidation to a Debt Management Plan (DMP) or bankruptcy and IVAs. No matter what level of debt you are in, there is a debt solution for you. Just take a look at the Debt Solution section of our website for information on the various options available to suit your needs or call us today for impartial guidance.