Debt is extremely common in the UK, yet many Brits shy away from talking about it. This silence creates a vicious cycle where individuals don’t speak about their debt and, in many cases, don’t even realise they are in high debt at all.
The average debt in the UK currently stands at around £30,000 per adult – without including student loans. A small amount of good debt is acceptable, but large amounts can put your finances at risk. So, it is best to be honest and take action if needed.
Keep reading to learn more about high cost debt and whether you are in the high debt category.
High debt (or a high debt ratio) refers to a financial situation where someone owes large amounts of money when compared to their income and assets. This borrowing is usually through mortgages, credit cards or loans.
There are multiple ways to define high debt, including the debt-to-income ratio, whether the individual is at risk of default or bankruptcy, or whether they are experiencing financial signs of high debt (e.g., can’t make minimum payments or borrowing more to stay afloat).
High debt refers to owing large amounts in comparison to income and assets.
In contrast, expensive debt describes debt with high interest rates. This makes it expensive to borrow, as you will have to pay off much more than the total amount borrowed.
Generally, high debt in the UK is defined as a debt-to-income ratio of over 50%. This means an individual uses over 50% of their income for debt repayments.
If you fall into this category, you will likely face:
These three points are key indicators of unmanageable or high debt levels for UK consumers.
High debt is harmful because of the impact it has on your personal finances and overall quality of life.
Those with a lot of high cost debt tend to face more financial stress, which can lead to mental and physical health symptoms. They also have less financial flexibility and fewer savings, making it harder to cope with emergency payments.
High debt can even lower your credit score, prevent you from taking out new loans in the future and put you at risk of default. This all means that high debt should be addressed sooner rather than later.
Paying off expensive debt may feel daunting to begin with. However, it is entirely doable if you commit to it and have a plan.
The best way to get started is to break your debt free goal down into smaller steps, such as:
Learn more about paying off debt in our overview guide here.
Actively managing your debt is essential for maintaining ongoing stability and flexibility of your personal finances. By prioritising debt reduction, you can regain control, improve financial health and create opportunities for better access to credit in the future. If in doubt, speak to your lender or a debt charity, if you want free and confidential advice.
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For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.