Christmas debt blues

Struggling workers are waking up to the New Year with a hangover of debt after the festive period, with nine million people beginning 2020 owing between £2,000 and £10,000.

 

As the cost of living soars and wages continue to stagnate, a third of workers in a recent survey said they were forced to borrow money to pay for Christmas. Of those who did borrow, the average worker took seven and a half months to pay it off.

 

In a separate poll, 53 per cent of workers said they believed Christmas forces them to live beyond their means, while 47 per cent said they turn to payday loans, credit cards and overdrafts to pay for the Christmas period.

 

Workers are also taking on extra shifts and overtime to pay for Christmas, with more than half of those polled – 55 per cent – reporting having worked longer hours in the run-up to Christmas. This figure was up from 48 per cent the previous year.

 

For those families claiming Universal Credit, the burden of debt can be even greater, with many claimants being forced to wait weeks for their first payment.

 

A toxic combination of stagnating wages and skyrocketing living costs have driven many households to exploitative payday lenders. Such lenders prey on the most vulnerable, with targeted ads during the Christmas season. Just before Christmas last month, the Mirror reported that ‘Very Merry Loans’ put out adverts featuring children’s presents and even Turkeys as reasons they should take out a payday loan.

 

The shameless payday lenders were offering these Christmas loans at sky-high interest rates of 669 per cent. Borrowing £500 from Very Merry Loans and repaying over 6 months would mean repaying a total of £1000.

 

Drowning in problem debt can feel overwhelming, but it doesn’t have to be that way – there are many ways hard-up families can get help to control spiralling debt.

 

One way that people can potentially manage their debt is by joining a credit union. Nick Brown, who is in charge of Unite’s credit union scheme highlights the benefits of the scheme.

 

“The credit unions offer a service where members can access credit at an affordable rate, as well as offering an effective method of saving,” he explained.

 

“With debt increasing at a frightening rate a lot of our members were struggling to get credit with the banks, and so were being forced into the clutches of the payday loan companies and door-step lenders,” he added.

 

“The interest rates with credit unions are fixed, and while perhaps slightly higher than the banks, it won’t threaten your household or security. Compared to the obscene 3,000 per cent APR lenders, it really is a breath of fresh air for people.”

 

Find out more about Unite’s credit union services here.