High-cost borrowers most at risk of falling behind on essential bills

5 September, 2013

People using high-cost credit such as payday loans, home credit, store cards and catalogues are more likely to be behind on essential household bills, according to new figures from StepChange Debt Charity. The charity believes the figures suggest a worrying tendency to use of high-cost credit to cover basic living costs.

Analysis of the charity’s clients shows that in 2012 arrears rates on rent, energy bills and Council Tax are higher amongst those using high-cost credit and that problems are particularly acute among those using payday loans and home-credit.

Council Tax arrears

Last year, 13 percent of all StepChange Debt Charity clients had Council Tax arrears, this rose to 17.1 percent among people with a least one high-cost debt. Among those with home credit and payday loans, the figures rose to 25.4 percent and 21.8 percent respectively.

Rent arrears

Last year, 8.6 percent of the charity’s clients had rent arrears. For those with at least one high-cost credit debt the figure stood at 11.2 percent. Among those with home-credit and payday loans the numbers increased to 21.1 percent and 13.8 percent respectively.

Electricity arrears

Last year, 8.9 percent of all clients were behind on electricity payments. For those with at least one high-cost credit debt, this figure increased to 10.4 percent. Among those with home credit and payday loan debts, the figures rose to 13.6 percent and 10.9 percent respectively.

Gas arrears

Last year, 6.3 percent of all clients had arrears on gas payments. For those with at least one high-cost credit debt this figure rose to 7.6 percent. Among those with home credit and payday loan debts the figures rose to 11.2 percent and 8.2 percent respectively.

StepChange Debt Charity head of policy Peter Tutton said: “These figures demonstrate how high-cost credit use is often linked to the ongoing struggle to make ends meet. 

“Unless there is a significant improvement in the position of household budgets in the near future, the basic cost of living will become an increasingly unbearable strain for more people.

“By positioning itself as the lender of last resort for the financially vulnerable, the high-cost credit industry risks promoting high-cost borrowing as a solution to financial hardship. Our evidence shows that this type of borrowing often deepens the problems of those people already in serious financial difficulty.”