Almost half of Brits are unsure how they will pay back the debt they have carried over into January 2021, new data has revealed.
Research from Monva, which provides a comparison service for financial products, said that of the 2,000 UK adults surveyed, over a third (36%) accumulated an average new year debt of £220 ($300), which according to its calculations equates to total debt of £4.1bn.
Those who used credit cards to finance Christmas accumulated even more debt in the period, equating to an average of £315, creating a total of £3bn additional credit card debt.
Now, two-fifths (40%) of Brits are unsure of how they will be pay back this debt.
Thinking of expenses in the past few months, one fifth of UK adults said they had to dip into their savings (18%) and 7% used ‘buy now, pay later’ options to finance Christmas. This figure doubled to 15% in the 18- to 34-year-old group.
Looking forward, 21% have said they will be dipping into their savings to pay their current debt, 10% plan to use an overdraft and 13% will be seeking help from friends and family.
Given this backdrop, it is not surprising that 43% of UK adults are said to be feeling pessimistic and unconfident about their finances this year.
Steve Wiley, Monva’s CEO said: “Our research shows that it was more difficult for some to put more money than usual aside. Many have started the year in debt without a plan in place to pay back this debt.”
He recommended that anyone currently carrying debt, whether on a credit card or personal loan, should consider using any extra cash to pay off their debt soon, and avoid building further interest.
This could be done by paying off the balance in full or increasing monthly payments.
Those whose savings do not cover their entire debt should focus their attention on the most expensive debt first: the credit cards or loans with the highest interest rates.
He added that while those with low interest or 0% balance transfer products might be tempted to spend or save the cash, repaying any debts sooner could help avoid further financial pain down the road.
“Once the debt is cleared, consumers can keep building positive financial habits by putting any ongoing savings into investments,” he said.
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