That’s according to research by uSwitch.com which revealed three quarters of Brits hold debt. Yet one in five did not realise monthly bills for services such as car insurance or store card payments were actually repaying money they owed.
Meanwhile, researchers discovered, a third of consumers were struggling to manage their debt and 21% felt compelled to lie about how much money they owed to creditors.
According to the research, compiled as part of uSwitch.com’s first consumer debt profile, a fifth of UK adults have missed repayments within the last 12 months and 20% have suffered a knock to their credit score because of their debt management.
Now uSwitch.com is urging people to look at their monthly agreements to check they are meeting repayment obligations. It has suggested setting up direct debits or monthly bill reminders.
Tashema Jackson, money expert at uSwitch.com, said: “It’s incredible that seven million Brits believe they are debt-free but have actually signed up to a credit agreement.
“A lack of knowledge about what liabilities they have, combined with many struggling to manage their debts, could spell trouble ahead – especially for those who have become reliant on cheap credit to fund their lifestyles.”
Uswitch.com’s research revealed, excluding mortgages and student loans, the most common type of debt were credit cards and personal loans. But so many people held credit agreements to pay for mobile phone handsets, overdrafts and home insurance they featured among the top five debts Brits were most likely to hold.
Jackson added: “The truth it is increasingly difficult to avoid taking on debt, especially given that premium smartphone prices are now at an all-time high and insurance costs continue to rise.
“However in some cases you may be better off using a 0% purchase credit card or taking out a personal loan to pay for them outright.”
Uswitch.com also advises, when repaying debt, to do so responsibly by making the minimum repayment by setting up direct debits to pay the bill monthly.
By paying more than the minimum, whenever possible, you could reduce the length of time it takes to pay off and also cut down the interest.
Jackson added: “For those really struggling, speak to your bank and see if they can help. If you are still concerned, charities such as StepChange offer free and impartial advice to help get your debt under control.”