1.7m borrowers turn to high cost lenders
1.7m people are turning to high cost lenders in an effort to pay off other debts as households become increasingly reliant on credit solutions.
New research from Creditspring found that almost a quarter (24 per cent) of people who borrowed from high cost lenders did so in order to pay other debts.
The same number of people said that they faced paying higher than expected fees.
Creditspring warned that an increasing reliance on credit could place millions of Brits at high risk of falling into a debt spiral.
“The UK is teetering on the edge of a debt crisis,” said Neil Kadagathur, co-founder and chief executive of Creditspring.
“The rising cost of living has driven reliance on credit but also forced millions of people into a corner where they’ve no choice but to borrow from several lenders to survive. This situation can rapidly spiral out of control and put households under unimaginable financial pressure.”
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Kadagathur called on lenders to offer more support to borrowers and improve transparency around fees, so that people can make more informed decisions about borrowing money.
“Unfortunately, the lending industry remains opaque when it comes to borrowing fees,” he added. “All too often there is a lack of transparency around the true cost of borrowing and millions of people are hit by hidden and unexpected charges.”
Creditspring’s research found that younger people are being most impacted by the rising reliance on credit. 11 per cent of 18-34 year olds said that they have taken out a new credit card to pay for their groceries, while eight per cent have taken a new credit card to pay their bills.
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Meanwhile, a fifth of Brits have already dipped into their savings to pay off their debts, rising to 39 per cent among 18-34 year olds.
“Millions of people are raiding their savings just to survive the current cost of living crisis – clearly, this will have a disastrous impact on their future financial wellbeing unless drastic action is taken,” said Kadagathur.
“Much more support is needed by government over the next few months but it’s also time for lenders to step up and provide more responsible credit products that protect borrowers and don’t encourage them to take on extortionate debts.”
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