Borrowers 'in debt denial'
UK consumers are in a state of denial when it comes to debt, with the average person owing nearly twice as much as they realise on credit cards, loans and overdrafts, a survey said today.
Research by market analyst Mintel revealed that while borrowers thought they owed an average of £5,251, figures from the Bank of England show the actual figure stands at £10,300.
As a result there is an extra £100bn of debt of which consumers are simply not aware.
Mintel said people were "burying their heads in the sand" when it came to their personal finances, with nearly half of adults estimated to owe money on cards, loans and overdrafts, but only one in five claiming to be worried about the debt.
Finance experts said the discrepancy between what people think they owe and their actual debt was due to a combination of bad financial management and fears about facing up to their problems.
Lisa Taylor, from financial information provider Moneyfacts, said: "Many people know they have a problem but often they're afraid to address it. The high-spend culture encourages you to live for today and worry about the consequences later.
"Credit cards and loans are easy to get into confusion over because the bills may arrive at different times of the month. So collating it all together requires a certain amount of financial discipline which many people sadly do not have."
According to the Mintel survey, people with a mortgage were much more likely to have a clear idea of their finances, with homeowners estimating they were in the red on average to the tune of £92,200, when the actual figure was around £95,000.
Unsurprisingly, low-income families were most likely to struggle with debt.
While households with earnings of more than £50,000 a year generally took out loans to increase their assets or pay for education, those earning less than £15,500 tended to borrow money just to meet everyday living expenses.
Almost two-thirds of high earners had borrowed money to buy a house, compared with 15% of low earners.
Toby Clark, senior finance analyst at Mintel, said there was a major need for more financial education, as well as a drive to get people to look at their debts.
He added: "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."
Source: guardian.co.uk
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