Households pushed into debt as inflation and cost of living surge
Martin Lewis gives financial advice on dealing with debt
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New research has found that over a quarter (27 percent) of people with dependents have admitted that they will need to borrow money to survive this winter. A survey of British families by subscription loan provider Creditspring revealed that families with young children are set to suffer the worst over the coming months than those with older dependents. Only five percent of families with older children are planning to borrow in order to get themselves out of debt.
Around half of families with children under the age of 18 are almost three times more likely to say they’re unable to financially survive another lockdown this winter than those without children.
Experts are citing the recent rise in inflation and living costs as to why households are set to struggle going into the new year.
Figures from the Centre for Economics and Business Research show that the average family could be £1,700 worse off next year.
This comes as inflation in the UK has hit 5.1 percent, with forecasts suggesting it could rise to 5.5 percent in early 2022.
Neil Kadagathur, the co-founder and CEO of Creditspring, explained what low income households are likely to face and why so many are falling into debt.
Mr Kadagathur said: “Families are feeling the brunt of rising costs during the most expensive time of the year and are becoming increasingly worried how they’re going to survive what is shaping up to be the toughest period since the financial crisis.
“Families are facing a perfect storm which is going to pile more pressure on budgets. Inflation and living costs are soaring at the exact moment when the nation needs to tighten the purse-strings.
“The approaching Christmas period is only going to exacerbate the situation and could be the tipping point that pushes households into debt.”
The financial expert also outlined the dangers posed by families receiving loans from high-cost lenders in a bid to prevent their debt from spiralling during the holiday season.
Research from Creditspring found that almost 22 percent of families with children under 18 have been forced to turn to high-cost loans.
This has come about after being rejected by mainstream lenders, with 20 percent of these borrowers having struggled with the expensive repayments.
As a result of this, 40 percent of families with children under 18 want additional support from banks when making financial decisions and managing money.
He added: “Banks and financial providers need to step in to ease the pressure on families before it’s too late.
“The impact of the pandemic is still raw and with yet more uncertainty and restrictions, families need support to help get through the coming months.
“Affordable credit has provided an invaluable lifeline for people across the UK however, access to these options remains limited.
“There are still too many families forced to turn to high-cost lenders who take advantage of their perilous financial position and offer credit with extortionate repayment terms.
“With a lack of support, the fear is that the situation could become significantly worse before it gets better.”
Anyone struggling with debt-related issues is encouraged to get in contact with Citizens Advice on how best to get out of their situation.
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