Quarter of Brits lose sleep over debt

More than three in five UK adults are in some form of debt, while a quarter lose sleep over the amount of money they owe, new research has found.

A survey by comparison website KnowYourMoney.co.uk has revealed that 62% of Britons have some form of debt, with the most common types being credit cards (35%), mortgages (24%) and student loans (11%, rising to 28% among millennials).

Of these, 29% said they do not feel in control of their debt and have no clear plan of how they can pay it off, while 24% of people said they lose sleep over the amount of money they owe.

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Two thirds (67%) of those in debt have no money in savings to pay off debt if required, with men (73%) more likely than women (62%) to lack a financial safety net.

To make matters worse, almost half of UK adults (48%) are worried about the impact of Brexit on their personal finances.

According to an analysis by the TUC, household debt in the UK hit a fresh high last year, totalling £428bn.

Excluding mortgages, average debt per household rose sharply in 2018 to a new peak of £15,385, up £886 in a year. This is roughly three times what is was two decades ago, and means the level of unsecured debt as a share of household income is now 30.4%, “the highest level it has ever been at” says The Guardian.

The TUC says government austerity and years of wage stagnation are to blame, with the BBC reporting that “millions of households were now reliant on borrowing to get by, with working families on average worse off than before the financial crisis”.

The figures are backed up analysis of data from the Bank of England, which show unsecured personal debt in the UK has increased 27% since 2013.

This is six time more than real wage growth over the same period, according to the Jubilee Debt Campaign.

New research from the Money and Mental Health Policy Institute (MMHPI) which found 1.5 million people in England are currently struggling with both problem debt and mental health problems at the same time.

The charity, which was set up by MoneySavingExpert.com's Martin Lewis, adds that people with mental health problems are three and a half times more likely to be in problem debt compared to those without mental health problems.

John Ellmore, Director of KnowYourMoney.co.uk, said: “Despite the negative connotations that sometimes surround it, debt should not be frowned upon. If handled responsibly, debt is a valuable financial instrument that can help enable life’s purchases.

Yet KnowYourMoney.co.uk research has revealed that 41% of people survey do not feel comfortable talking to friends and family about debt.

Warning there are millions of people across the UK who are taking on debt without a plan of how to repay it, Ellmore said “it’s vital consumers understand what their debt-to-income ratio is and manage their finances accordingly – this will help them sleep easier at night and avoid serious financial repercussions further down the line.”

A person’s debt-to-income ratio (DTI) is their monthly debt payments divided by their gross monthly income. An important means of understanding an individual’s financial health, lenders commonly use the calculation to assess someone’s viability for credit.