Debt burden growing for older borrowers

IN SCOTLAND, the average debt of an individual is an alarming 22 times their monthly take-home pay - a figure showing the staggering scale of the problem, partly created by today's borrowing culture.

Couples owe the most, with an average debt of 31,239, compared with 17,355 for single women and 19,712 for single men.

And one report - Debt in Scotland - published this week by the Consumer Credit Counselling Service Scotland (CCCS Scotland) revealed this is increasingly becoming an issue for middle-aged and older people.

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Increasing debt cannot be put down to spiralling house prices as these figures do not include outstanding mortgage balances.

By studying the details of 9,000 Scots it has counselled on debt since 2003, the charity found 57 per cent of clients are now aged over 40. This is in stark contrast to five years ago when the same proportion was under that age. Some 10 per cent are over 60 and only nine per cent are 25 or younger.

On a slightly brighter note, there has been only a small increase in debt over the past four years.

Malcolm Hurlston, CCCS Scotland's chairman, said: "We are finding older people are in more debt. They no longer want to follow a cocoa and slippers lifestyle and over-60s are the first generation to have grown up with credit cards. We're inevitably seeing more people in that age group familiar with borrowing.

"The idea of life-cycle debt where individuals use credit in their younger years and pay it back as they age would appear to be shifting as those in older age groups, faced by spiralling housing costs, increased living costs and lower than expected returns from pensions, use credit as a means to maintain a high standard of living."

As well as looking at age, the study examined gender, housing situation and marital status to paint a picture of who in Scotland is suffering most in financial terms. Increasing numbers of women are becoming over-indebted and these tend to be single, on lower incomes than average and often have children. CCCS Scotland said this demographic is more vulnerable to debt problems than the norm. This year, 57.3 per cent of its clients were female, compared with 52.3 per cent in 2003.

The report continued: "Couples are more likely to own a home and have children, which increases the potential levels of debt. However, they also have a greater ability to repay and more flexibility in dealing with debt problems."

Since 2003, the number of people seeking help from CCCS Scotland has more than doubled from just over 1,000 in 2003 to around 2,600 last year. Its online counselling service, CCCS Debt Remedy, has helped another 3,000 in the ten months since launch last September. It is now looking to offer more face-to-face counselling, delivered though a network of organisations in Scotland.

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Hurlston added: "With rapidly rising interest rates and a general tightening of the credit economy, we expect demand for our service will remain strong."

But he said the situation is not all doom and gloom as the amount of debt owed is falling across all ages. CCCS Scotland clients with a higher debt-to-income ratio of 60:1 or over only represent around 3 per cent of the total number of people it advises.

Citizens Advice Scotland (CAS) said consumer debt is still the biggest issue it deals with - it advised people with debt totalling 211 million last year.

Ian Brown, a CAS spokesman, said: "A lot of debt is caused by poverty and not just consumer spending. Some people have no collateral and can be pushed into poverty by a number of factors. There is a government social fund, but this can be hard to access.

"The credit market is now mature and lenders have been willing to let customers borrow more. Only this week we heard about subprime mortgage borrowers being encouraged to lie about their income.

"If someone is concerned about debt, they should seek free independent advice and not go to companies which, for example, charge for consolidation loans."