KnowYourMoney.co.uk has commissioned a survey among more than 2,000 UK adults to uncover people’s attitudes towards being in debt and how they are managing it
Millions of Britons are taking on multiple forms of debt without a clear plan of how to pay it off, new research by KnowYourMoney.co.uk has revealed.
The comparison website commissioned an independent, nationally-representative survey among more than 2,000 UK adults. It found that 62% of people across the country have some form of debt, with credit cards (35%), mortgages (24%) and student loans (11%) the most common.
Nearly three in ten (29%) people with debt said they do not feel in control of it and have no plan of how they will pay it off. A third (33%) also said they buy items on their credit card without first thinking about how they will pay it off later.
Two thirds (67%) of those in debt have no money in savings to pay off debt if required, with men (73%) more likely than women (62%) to lack a financial safety net.
Without clear plans or savings, people’s debts are evidently a cause for anguish – 24% of people in debt said they lose sleep because of it, while 41% do not feel comfortable speaking to friends or family about the subject. To make matters worse, almost half of UK adults (48%) are worried about the impact of Brexit on their personal finances.
To help people get a handle on the issue, KnowYourMoney.co.uk has launched a new online resource – We Need to Talk About Debt – which provides education and advice for people to manage their debt effectively.
Elsewhere, the study uncovered that 44% of UK adults do not know what their debt-to-income ratio is, with 39% admitting to not understanding the term.
An important means of understanding an individual’s financial health, a person’s debt-to-income ratio (DTI) is their monthly debt payments divided by their gross monthly income. Lenders commonly use the calculation to assess someone’s viability for credit.
John Ellmore, Director of KnowYourMoney.co.uk, commented: “Despite the negative connotations that sometimes surround it, debt should not be frowned upon. If handled responsibly, debt is a valuable financial instrument that can help enable life’s purchases.
“However, KnowYourMoney.co.uk’s research demonstrates that there are millions of people across the UK who are taking on debt without a plan of how to repay it, which is unadvisable. It’s vital consumers understand what their debt-to-income ratio is and manage their finances accordingly – this will help them sleep easier at night and avoid serious financial repercussions further down the line.”