According to a recent study, personal debt in the UK is now more than £180bn. Researchers warned that it could quickly become a major problem regardless of how much people earn and where they live.
The personal debt study, conducted for BBC News by Experian and debt charity StepChange, looks at personal loans, credit and store cards but did not include mortgages. StepChange said that debt is not necessarily connected to where you live – and although younger generations are most at risk of debt, older generations can also struggle with money worries and mounting debts too.
Getting into debt
Wonga South Africa conducted a linked study into personal debt and what people spend their money on. It distinguishes between two different types of debt, ‘good’ and ‘bad.’ Wonga explains what good debt might be classed as, “If you are taking out a loan to pay your way through university then this is considered to be good debt. After all you are putting yourself through university tertiary education to improve yourself and ultimately increase your earning prospects. Likewise with the purchase of a house, the money you borrow to buy a house or property is also seen as good debt.”
Bad debt, on the other hand, might be a more problematic area. If you are spending excessively on items you don’t need, cannot afford or are expensive to you, then you may later find yourself in financial difficulty which is why, perhaps, a lot of the UK have found themselves in a worrying debt situation.
Consequences of debt
The problem comes when people are borrowing money for which they have not considered properly, do not know the repayment terms for and who, as a result, become overwhelmed with debt. This can quickly spiral out of control, leaving the person with stress, anxiety, depression and no way out of the debt. Many studies also suggest that relationship breakdowns can also happen as a result of arguments about money. With such a strong effect on your life, it is important to try and avoid sustained personal debt altogether.
Information and help
There is help out there and by acting quickly, you can avoid high interest rates and aggravating creditors. The money advice service, which can be accessed online, is a good source of information. There is information on this site about how to control debt, but also how to stop getting into debt in the first place. As Wonga suggest, drawing on credit cards and personal loans is not a bad thing, so long as you know what you’re doing and how you intend to repay.