UNSECURED DEBT LEVELS RISE SHARPLY FOR PEOPLE WITH ADVERSE CREDIT

22 January 2024

More than four in 10 (43%) of people with adverse credit say their level of debt has increased in the last 12 months, according to the latest Pepper Money Specialist Lending Study.

This is up from 33% of people with adverse credit who said their level of debt had increased in the previous 12 months.

The study found that 30% of people with adverse credit have outstanding debts, aside from their mortgage and student loans, of more than £5,000, whilst nearly one in ten (9%) have outstanding debts of more than £15,000.

According to the study, 45% of people with adverse credit say their use of Buy Now Pay Later credit has increased in the last year, with 17% saying it has increased a lot.

The 2023 Pepper Money Specialist Lending Study is available to download now at pepper.money

Ryan Brailsford, Business Development Director at Pepper Money, said:

“It’s often the case that customers who have a history of adverse credit also have significant balances on unsecured debt. One way to get on top of these debts is by raising capital with a remortgage to pay off the separate balances, consolidating them into additional borrowing secured on their property.

“Restructuring finances in this way requires careful consideration. However, in the right circumstances, it can significantly reduce the monthly cost of servicing that debt, which could prove a vital lifeline for households struggling to make ends meet in the current environment.

“When it comes to debt consolidation, many lenders will include a maximum debt to income ratio as part of their affordability calculation, which could limit a customer’s ability to raise enough capital to clear their debts. However, not all lenders take this approach, and, at Pepper Money, we have no predetermined level of debt. Some lenders will also limit the LTV to which they allow debt consolidation, but again not all lenders, and at Pepper Money, we allow debt consolidation up to maximum LTVs.

At Pepper Money, we can also offer your customers an enhanced free legals service, covering the cost of legal work required on remortgage applications, including debt consolidation.”