The cost-of-living crisis is hitting us all, to some extent, but it’s hardly a surprise that the worst hit are the most financially vulnerable people. For many, the only way out seems to be taking on debt, which can lead them into a debt spiral it’s hard to break — and this is especially a risk over Christmas.
Debt Patterns in 2023
Recent figures show that, on average, 22% of people in the UK have fallen into bad debt after buying something on credit. However, among people classed as financially vulnerable, this figure doubles to 44%.
There’s a similar picture looking at people taking out a new credit card (40% on average, 52% of financially vulnerable people) and those using “buy now, pay later” (29% as opposed to a 13% average). Overall, 57% (as opposed to 42% average) felt they were in a worse financial position than ever before, noting that their banks were providing little support.
This position is likely to get even worse over the Christmas holiday. Christmas is supposed to be a time of celebration, but it’s also a time when people are under pressure to spend, especially if they have young children. Figures show that 64% of parents with children under 18 feel pressure to spend beyond their means at Christmas.
What Does This Mean for Financially Vulnerable People?
Unfortunately, this situation has led to an increase in defaults in credit repayments this year, with 32% of lenders reporting an increase in defaults, as well as 31% of applications for loans being rejected on affordability grounds.
With increasing pressures from soaring utility costs and the added pressure of Christmas, this is likely to drive more people into taking up either irregular or fraudulent loan offers. This could see them falling into a debt trap from high interest rates, or else being victims of scams, where they pay a fee for a loan they never receive.
How Might This Affect You?
Hopefully you’re not in danger of falling into bad debt, although that’s possible if your business is struggling in the current difficulties. If you are tempted to take on debt to cope, be sure you discuss it first with an expert to ensure you’re doing it in an appropriate way.
It’s more likely, though, that the effect will be indirect, through customers who find it hard to pay their bills. This is where you need to work with a debt collection agency that will work with your debtors to distinguish the “can’t pays” from the “won’t pays” and identify ways in which the “can’t pays” can be helped into a position where they can repay what they owe as quickly as possible. Not to mention being able to return as valuable customers when they’ve recovered from their problems.
Give me a call to find out how I can help you to go after the “won’t pays” and help the “can’t pays” to settle their debts with you.