This means consumers have only earned enough simply to cover the interest they have built up and have still yet to start re-paying the actual debt itself.
Today marks this year's Debt Freedom Day, the day when borrowers will be free of the interest compounded on their debts. It is calculated by taking the average interest payment on outstanding unsecured loans and credit card debts and dividing this by the average person's daily earnings. Unbiased.co.uk's figures show that personal loan levels in the UK reached over £120 billion in 2010 whilst consumers accrued over £58 billion in credit card debts. These soaring levels could also be partly attributed to the high interest consumers are being charged on their credit cards, with the average rate for 2010 at 16%.
Unbiased.co.uk's research reflects the significant level of debt consumers have accumulated over the last year, putting themselves at risk of further problems in the long-term. The latest figures from The Insolvency Service report a decrease in the number of personal insolvencies in the last quarter of 2010, but figures from also show a 0.7% rise overall on 2009 which they report as the highest number since records began in 1960.
Karen Barrett, chief executive of unbiased.co.uk said "With debt levels still remaining at extreme highs there is no better time for people to service their debt and get back in control of their finances. Debt Freedom Day is not only to remind consumers of how much of their hard earned cash they shell out just to pay off the interest alone but to highlight the need to take action now and seek advice.
"Rather than worrying about it and letting their personal finances spiral out of control, people should instead pro-actively manage their finances and get advice from an independent financial adviser who will help them make sure they are making the right choices according to their financial situation.”