Over two in five (43%) of people with adverse credit have said their level of debt has increased in the last 12 months, according to Pepper Money.

The firm’s specialist lending study revealed that this was up from 33% who said their level of debt had increased in the 12 months previous.

Business development director at Pepper Money, Ryan Brailsford, said: "It’s often the case that customers who have a history of adverse credit also have significant balances on unsecured debt. One way to get on top of these debts is by raising capital with a remortgage to pay off the separate balances, consolidating them into additional borrowing secured on their property.

"Restructuring finances in this way requires careful consideration. However, in the right circumstances, it can significantly reduce the monthly cost of servicing that debt, which could prove a vital lifeline for households struggling to make ends meet in the current environment."

The study also revealed that 30% of people with adverse credit have outstanding debt, aside from their mortgage and student loans, of more than £5,000, while nearly one in 10 (9%) have outstanding debt of more than £15,000.

Furthermore, 45% of people with adverse credit said their use of ‘buy now pay later’ credit has increased in the last year, with 17% indicating it has increased a lot.

Brailsford added: "When it comes to debt consolidation, many lenders will include a maximum debt to income ratio as part of their affordability calculation, which could limit a customer’s ability to raise enough capital to clear their debts.

"However, not all lenders take this approach, and, at Pepper Money, we have no predetermined level of debt. Some lenders will also limit the LTV to which they allow debt consolidation, but again not all lenders, and at Pepper Money, we allow debt consolidation up to maximum LTVs."

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