A third of adverse credit borrowers up unsecured debt this year

According to Pepper Money’s specialist lending study, which surveyed 6,000 adults, 33 per cent of those with adverse credit had increased their unsecured debt over the last 12 months.

Around 40 per cent said they had grown the debt they have on Buy Now Pay Later schemes.

Approximately one in five people with adverse credit have outstanding debt, outside of a mortgage and student loans, of over £10,000.

Nearly a third (31 per cent) of those with adverse credit said they feared their level of outstanding debt would make it more difficult for them to get a mortgage.

‘Managing short-term debt increasingly challenging’

Tom Whitney, head of sales for second charge mortgages at Pepper Money, said: “The cost of living crisis is driving an increase in levels of unsecured debt at the same time as rising interest rates are making it more expensive to service this debt.

“The monthly commitment of servicing short-term debts such as credit cards, store cards and overdrafts, can stifle the ability of many families to meet their monthly outgoing and many will be looking to streamline their finances.”

He continued: “In the right circumstances, consolidating expensive short-term credit onto a longer-term loan at a lower rate, could help to put families in greater control and to normalise their finances, as they pay down that credit over the longer term.”

Whitney said that managing short-term debt could be “increasingly challenging” for customers feeling food price inflation and rising energy prices.

“It is important our broker partners to undertake a comprehensive review of their customers’ circumstances.

“It may be that waiting for a remortgage may not be right for everyone, but a second charge mortgage used to consolidate unsecured debts could help customers to reduce monthly outgoings and give them the breathing space they need to manage their monthly finances and navigate this difficult period,” he noted.