'Distressed borrowing' - a growing problem?

"Distressed borrowing" is a modern phenomenon that is used to describe the practice of borrowing money to pay for everyday essentials.

In the current economic climate, incomes are remaining static; food, energy and transport costs are rising faster than our incomes; unemployment is at the highest level for 17 years and household finances all over the country are being stretched much more than before the recession.

When people are forced into debt to pay for everyday essentials like heating, it's known as 'distressed borrowing' - and it's happening all over the country. Many households are getting into debt just to get by.

The latest figures from the Bank of England reveal that £500 million more was borrowed in loans than repaid in September this year. £200 million more was borrowed than repaid on credit cards in the same period. It is unclear how much of that debt was down to 'distressed borrowing'.

In fact, no one can be certain how many people are borrowing to pay the bills. If you look at credit card debt overall, it has actually decreased since before the recession. Figures from the UK Cards Association indicate credit card debt reached a peak of £69 billion in February 2006, while it's currently down to £57 billion.

However, The Independent rightly points out that credit card interest charges have increased in that time. It reports that nine years ago the average credit card interest was 13.9%, whereas it's currently 18.4% - which is almost 50% higher. So while the amount borrowed on credit cards may have decreased on average, many people could be paying more in interest - which can have a real impact on their disposable income.

A spokesperson for debt management company Gregory Pennington commented: "The term 'distressed borrowing' is fairly modern, but it's really another name for a 'debt trap'. Once you are forced to borrow money to pay for essential living costs, you run the risk of falling further and further into debt, as the same expenses will be there month after month, but so will the debt repayments.

"It may be possible to reduce the cost of your debts with the help of a debt expert. If you are concerned about your level of debt, we strongly advise that you speak to a debt expert."