About eight million people are due to go into their overdraft this month, with two million believing that they will go into an unauthorised overdraft position, according to research published in R3’s latest Personal Debt Snapshot report.
The study also finds that 36 per cent of people believe that their financial situation will worsen over the next six months, while 32 per cent of people are now saving less than they used to – this equates to 15 million people.
R3 president Frances Coulson said: “These figures make for worrying reading. It is clear that many have found themselves in a position whereby they have to go into and often exceed their agreed overdraft in order to keep on top of their bills and debt repayments.
“Unfortunately, more often than not this leads to bank charges, which further deplete the amount available for bills. It’s a catch-22 situation which can result in debts snowballing.”
Coulson said a sudden change in circumstance such as redundancy tends to trigger insolvency.
She explained that with many people effectively experiencing a pay cut as living costs continue to rise, it is not always possible to set aside money for a “buffer”.
Coulson added: “Our research shows that 19 percent of people now set a budget. This is definitely a positive step as, for those who are struggling with their debts, a budget is a key tool which allows you to clearly compare how much money you spend against your income. This will help to identify if any savings can be saved and where.”