One in six Scots is borrowing on credit cards, from family and friends or taking out loans to pay for Christmas this year, compared with one in ten across the UK as a whole, according to new research from insolvency trade body R3. Its Christmas debt survey is published as new figures point to a surge in the number of people taking out expensive pay-day loans in recent weeks.
While 80 per cent of those borrowing to finance Christmas are confident of paying it back within a month, 7 per cent admit they could still be clearing the bill in June next year, according to the R3 poll. It also found that one in ten people in Scotland fear they won’t have enough money left over after Christmas to pay their bills at the end of this month.
John Hall, R3 Scottish council member, said he was not surprised by the results.
“What is of greater concern is that Scotland is among the highest percentage in the UK. Given that Scotland is much more reliant on the public sector for employment, it is surely not sensible to borrow at a time of such economic difficulties and job insecurity.”
That 7 per cent of Scots are taking three to six months to repay Christmas debts is “extremely alarming”, Hall added. “This means that one in 14 Scots is still paying for festive celebrations at the start of summer.”
He warned that many could turn to more expensive debt to cover their festive season costs, including pay-day loans and costly credit cards.
“They should be wary of the high interest rates that often accompany these products, as this will also leave them lumbered with Christmas debt long into next year. I would advise anyone struggling with their finances around the Christmas period to seek the advice of a professional as soon as they can”
Young people are especially vulnerable to debt problems arising from Christmas borrowing. One in five Scots aged 18 to 24 is already in debt because of festive spending, compared with just 4 per cent of over 65s. And with youth unemployment continuing to rise, those debts could prove difficult for some to repay.
“Fewer people than last year, across the board, have borrowed money but there are still some weeks until Christmas. With unemployment figures up, we can only expect to see more people saying they are struggling to afford the demands of the festive season,” said Hall.
His concerns appear to be borne out by online payday lender Ferratum, which yesterday reported a significant increase in applications for its “microloans” as Christmas nears.
Ian Porter, UK sales and marketing Manager at Ferratum – which offers loans of between £50 and £300 with 45-day repayment periods at an APR of 3,113 per cent – said demand is set to escalate.
“The expected surge in demand for micro-loans in the run-up to Christmas is due to a number of factors. Among them is people’s need to find a few extra pounds to help buy last-minute gifts or food for Christmas, but also the growing awareness of the simplicity of pay-day loans and how they can provide short-term help when you run short of money.
“We are already seeing a significant increase in applications for our microloans and we still have three weeks to go until Christmas Day.”