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| BankruptcyNews |
Posted - 18 July 2007 : 09:32:28
Borrowers 'burying heads in sand' over debt levels
TOTAL personal debt in the UK is about £100 billion more than people realise, according to new research released today.
Market analyst Mintel said people were "burying their heads in the sand" when it came to debt, with individuals typically owing twice as much on credit cards, loans and overdrafts as they thought they did.
It found the average person estimated they owed £5,251 in unsecured debt - not including mortgage borrowing. But Bank of England figures show the actual amount is nearly twice this level at £10,300.
Around 43 per cent of adults now owe money on credit cards, loans and overdrafts, but only one in five claimed to be worried about the debt he or she had taken on.
People with a mortgage were more likely to have a clear idea of how much they owed. Homeowners estimated they were an average of £92,200 in the red, when the actual figure was around £95,000.
Toby Clark, senior finance analyst at Mintel, said: "While Britons do seem to have a good grasp of their mortgage borrowing, they are wildly under-estimating the amount of money they owe on credit cards and loans.
"Clearly, it is a lot easier to keep an eye on a single mortgage, than it is to juggle a couple of credit cards, a personal loan, a car loan and maybe even an overdraft as well."
But he said there was a major need for more financial education, as well as a drive to get people to look at their debts.
He said: "Without a detailed understanding of exactly how much they owe and what rates they are paying, it is easy to see how the situation could spiral out of control."
Low-income households were more likely to struggle with debt than high-income ones.
Households earning less than £15,499 tended to borrow money just to meet everyday expenses.
Source: scotsman.com
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