What is consumer debt?

Consumer debt is money borrowed by individuals for personal use, rather than for business purposes. In the UK, it includes credit cards, personal loans, overdrafts, store cards, Buy Now Pay Later arrangements and other forms of personal credit.

Common types of consumer debt in the UK

• Credit cards — revolving credit with variable balances and interest rates
• Personal loans — fixed repayments over a set term
• Overdrafts — short-term borrowing through a bank account
• Store cards and retail credit — often carry higher interest rates
• Buy Now Pay Later — deferred payment plans that can be easy to lose track of
• Hire purchase — borrowing to buy specific goods, often a car

Why it matters

The cost of consumer debt depends on the interest rate, the balance and how long it takes to repay. Small balances at high interest rates can cost more than larger balances at lower rates. According to the Money and Credit statistics published by the Bank of England, UK consumers hold significant levels of unsecured credit. Understanding your own position is a useful starting point.

Signs your debt may need attention

• You are only making minimum payments
• Your balances are not reducing over time
• You are using credit to cover everyday essentials
• You feel anxious about checking your statements
• You have multiple debts with different payment dates

Simple first steps

Start by listing all debts in one place. Include the balance, interest rate, minimum payment and type of debt. This gives you a factual picture rather than an anxious guess.

How Ask Fin can help

High Impact Debt Reduction in Ask Fin helps you compare educational repayment approaches such as snowball and avalanche. My Monthly Budget can help you understand where money is going each month.