Number of people struggling with credit commitments doubles in pandemic

The number of people struggling to keep up with credit commitments has doubled since the start of the pandemic, according to new research from StepChange Debt Charity.

StepChange estimates that the proportion of people has reached three in 10 (30%) UK adults – a figure equating to around 15 million people – compared to 15% who said they were struggling in March 2020.

The findings form part of a new report, Falling behind to keep up: the credit safety net and problem debt, which indicates that the pandemic has further entrenched the use of consumer credit to make ends meet.

The report revealed that 8.6 million people in financial difficulty in the UK borrowed £26bn to cover their basic needs in the last year, which includes 3.5 million people who have used credit to pay essential bills. StepChange has also warned that the number of people resorting to credit is expected to increase as the cost-of-living crisis pushes up the price of basic household essentials.

According to the research, which was based on a study among 5,028 adults, 65% of those in difficulty have kept up with credit repayments by missing bills, borrowing from family and friends or being forced to cut back to the point of hardship.

StepChange chief executive, Phil Andrew, commented: “The sharp rise in the number of people struggling to meet their financial commitments should raise alarm bells across government, banks and regulators.

“We are two years into a financially damaging pandemic and going through the sharpest cost of living increase in a generation. While consumer credit can potentially play some part in helping people navigate short-term pinch points, this must not be at the cost of their long-term financial and personal wellbeing.”

StepChange is now urging the government and the FCA to do more to provide alternatives to borrowing for households that are struggling to meet unexpected expenses. The charity has called for grants via the social security system and a government-supported no interest loan scheme.

“For our clients, a cost-of-living crisis is not new – for years we have been seeing a steady rise in the number of households who experience debt simply through a prolonged period of not having enough income to meet their basic needs,” Andrew added.

“However, the number of such households looks set to grow, and in the absence of public policy intervention the risk is that such households will have no other option but to turn to borrowing in the short term, which will only exacerbate and prolong their financial difficulties.

“Those responsible for the steering us through these choppy financial waters need to be attuned to the harm many credit products, made available to people on the cusp of financial difficulty, can cause.”

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