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Tackling your debts

Are unsecured debt repayments swallowing your salary?

Posted 13 January 2015

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New research reveals how much of people’s take-home pay is being put towards their unsecured debt repayments each month. Find out what to do if you are struggling to make your payments.


How much of your salary do you spend each month making the payments on your credit cards, loans and other unsecured borrowing? If you find yourself paying out a big percentage of your take-home pay, you’re not alone. Across the UK on average debt repayments account for around 20% of our take home pay each month. But a recent survey* conducted by us has revealed that 1 in 15 people with unsecured borrowing are spending more than half of their take-home pay on their repayments each month.

 

Those aged 25-34 were most likely to spend over half of their take-home pay on their unsecured debt repayments, with 1 in 9 admitting to doing so.


Overstretching

If you spend a high proportion of your income just making debt repayments, not only can this be a worrying position to be in, but it is also unlikely to be sustainable for very long. Although circumstances differ, and a younger person without any dependants may be able to sustain paying a higher proportion of their income towards their unsecured borrowing, for a lot of borrowers this could lead to financial troubles in the long term. Remember, as well as these repayments you also need to consider your priority bills, such as rent or mortgage, food bills, commuting costs, utility bills and council tax. These priority bills need to be paid before any unsecured debts (non-priority bills) as there are more serious implications if you don’t pay, for example, there’s a risk of losing your home if you don’t pay your rent.

 

For more information on what are priority bills and what are non-priority bills click here.

Budgeting and advice

It’s a good idea to add up exactly how much you need to spend on your priority bills each month and subtract that from your take home pay. What’s left is what you can allocate for making the repayments on your unsecured debts. Once you’ve done the maths you may find that you’ve no money left over once these priority bills have been paid. Alternatively you may find you do have money left over, but not enough to make your repayments in full. In either case it may be time to reassess and seek advice. Our expert debt advisors could give you helpful information on the different options available to you so you can get your finances back on track.



*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 21st November and 28th November 2014

by Sarah Symons

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.