Around eight in 10 UK adults will carry debt into 2021, with the most common reason for holding debt in 2020 being “normal living expenses.”
That’s according to a study by financial comparison experts Money.co.uk. This is despite the fact that the average amount owed has reduced by around a third compared with the previous year, according to the research.
The study also found that 2% fewer people will be carrying over debt into the new year than this time last year.
That means, mortgages aside, 78% will go into the New Year with some form of personal debt — including money owed on credit cards, personal loans, car loans, bank overdrafts and payday loans.
Experts say the concerning figure is that 35% of people’s personal debt is largely due to “normal” living expenses. A further 15% say their debt is due to Christmas spending and 31% have identified that their personal debt is due to changed financial circumstances caused by the COVID-19 pandemic.
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The study of British adults was commissioned in December 2020 and shows that the average British adult ended 2020 with £9,246 ($12,497) worth of total debt – down 33% compared with last year’s average of £13,910.
Men are taking more debt into 2021 than women – UK males have an average of £11,581 debt at the end of 2020 compared with women, who have an average debt of £7,016 which they’ll carry over into 2021.
Salman Haqqi, personal finance expert at Money.co.uk, said: "It's worrying to see that so many never move their debt around to take advantage of better interest rates, something that could save them hundreds of pounds a year and help them pay off their debts sooner.
"It's always worth going online and investigating what options are available to you, especially as the new year starts, as there may be cheaper alternatives and strong offers from lenders."
One in five Brits plan on paying off their debt by consolidating the different debts they owe, up 7% compared with 2019. But 44% of people say they don’t move debts to take advantage of better interest rates.
Some £2,465 of the average debt is owed on credit cards, according to the research. Those aged 45-54 have the most credit card debt (£3,121) with those aged 16-24 having the least (£1,640).
Geographically, people living in Northern Ireland have the most credit card debt (£8,323) whilst those in the south-west have the least (£1,473).
But UK adults have actually reduced the amount of debt on their credit card by an average of £500 compared to the previous year, according to Money.co.uk research.
Those living in London are most likely to carry debt into the new year. According to the study, 36% of those living in the Greater London area will carry debt into 2021. But the number of people, countrywide, carrying debt across from the previous year into this year, is actually down 10% year-on-year.
The Money.co.uk study also shows that for 21% of people their debt repayments account for 11-20% of their salary.
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