Many young Britons take on more debt to combat cost of living crisis
Monday, October 31, 2022
Two-thirds of those aged between 18 and 34 years old say they have taken on new debt due to the cost-of-living crisis according to new research from The Mortgage Lender (TML).
Of this age group 10% have taken out a personal loan since the beginning of 2022. Even more concerning is 11% have taken out a pay-day loan, risking the high interest that comes with these products. This could have an impact on their future ability to access a loan or mortgage.
Signs of the cost-of-living crisis can be seen throughout the research. Respondents show a greater reliance on buy now, pay later schemes, with 18% of 18-24 years olds using them in response to rising costs. Of this an additional 25% have made greater use of their credit card.
Respondents also show how 16% of this age group have turned to using their overdraft more than they had done in previous years. If this becomes the case for a prolonged period and payments are missed this may lead to long term ramifications on individual credit scores.
Peter Beaumont, CEO of The Mortgage Lender, says: “Taking on any debt is risky, but to see younger generations take on the insecurity of a pay-day loan is troublesome. As cost-of-living concerns grow with rising energy costs, there’s a concern that later life plans can be severely impacted by the decisions individuals are being forced to make due to the current economic circumstances.
“While taking on debt may help some to deal with their immediate expense, it’s vital that they take it on with their eyes wide open and with a repayment plan in place. This will prevent the situation snowballing out of control and help get back in the clear as soon as possible.”