What is over-indebtedness?
While most consumers manage to service their personal debt, some
cannot, especially at times of economic difficulty, and become
over-indebted.
Over-indebtedness is ‘when consumers are
unable to meet credit commitments from available income, taking
account of minimal necessary expenditure’, according to research
from University of Nottingham commissioned by BIS. This and other
research into over-indebtedness is available from the
BIS website.
Different groups of over-indebted consumers
The NAO’s work on over-indebtedness identified
four distinct clusters within the over indebted population:
- Worried well: this
group are not falling behind and do not have a high number of
commitments, but sometimes struggle to keep up with repayments (49%
of our sample).
- Worried and at risk:
this group are currently keeping up, but they are always
struggling to meet their repayments (14% of our
sample).
- Over-Indebted: this
group are not badly indebted, but are falling behind on a small
number of bills (22% of our sample).
- Highly Over-Indebted:
this group of consumers are the worst hit. They have the
largest number of commitments, and are falling behind the most (15%
of our sample).
The consumer debt journey
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Alternatively, a text
description of the consumer debt journey (Word - 24kb) is
available.