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Unsecured consumer credit increases dramatically - Turn2us

Turn2us Debt information sheetThe amount of unsecured credit taken on by consumers rose dramatically to £732m in May according to figures from the Bank of England.

These point to a large increase in unsecured borrowing by UK consumers during May 2012. The amount of new borrowing, £732m, is almost double the amount of new unsecured borrowing taken out in April (£379m) and above the previous six-month average of £400,000.

Overdrafts and loans account for the bulk of new borrowing, increasing by £603m over the month, while credit card borrowing rose by just £70m.

The increase in unsecured borrowing has given rise to warnings the overstretched households may be relying on credit to fund their essential spending.

Joanna Elson, chief executive of the Money Advice Trust, said: "With inflation continuing to outstrip earnings growth it takes more and more of our income to put food on the table, travel to work and power our homes. As a result, people have cut back on their spending significantly. However, some find they can't cut back any more, and are borrowing to bridge the gap."

She added: "Borrowing money to pay for essentials is always a risk as there is rarely a sufficient guarantee you'll be able to pay the money back under the terms of the borrowing. It is better to seek independent expert advice to help you budget more effectively, ensure you are getting all the benefits you're entitled to, and make sure you are prioritising your bills and debt payments optimally."

If you are struggling to make ends meet, use the Turn2us Turn2us Benefits Calculator to check your entitlement to benefits and the Turn2us Grants Search to check your eligibility for a charitable grant.

See also our Debt information sheet

Source: Money Advice Trust (link opens in a new window)

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