Brits fund day to day spending with borrowing as cost of living bites

With budgets stretched, people are turning to borrowing money to fund both regular outgoings and day-to-day spending, according to new research from Tesco Bank.

A quarter (25%) of adults have borrowed money in the last six months, be that from friends and family, using bank or payday loans, or making use of an overdraft or credit cards. This significantly rises among those aged between 18 and 34, with over half (51%) borrowing money in the last six months.

It’s the pressure to cover regular outgoings that has prompted one in eight (18%) to borrow money, while 12% have borrowed to fund day-to-day activities with friends or family such as hobbies and days out.

When covering regular monthly bills people have borrowed an average of £674, while those covering day to day activities, such as hobbies and days out, have borrowed on average £715.

In other research carried out by Tesco Bank, the findings indicate that even before the cost of living crisis started to bite, families were looking into their borrowing options. Though nearly two in five (39%) UK consumers who have taken a personal loan in the past 5 years say the cost of living influenced their decision to take one out in order to help support their household finances.

As part of the research, Tesco Bank also looked at how people view debt in the current climate. A third (33%) of people say it’s very easy to slip into owing money and a similar proportion (31%) think there should be more awareness and support for people who are looking for help with their finances. However, for some, debt remains a taboo topic with 23% saying they would feel shame and embarrassment and 18% say they’d never confess to anyone that they were in debt.

Some people might owe money to several different lenders, and with the cost of living and some interest rates increasing, a debt consolidation loan could help. These let customers use money from a new loan to pay off existing debts. It lets customers gather all their debt into one place, so they only have one monthly payment to make instead of multiple payments. Depending on personal circumstances this could be a good way to reduce the size of monthly repayments. The total amount of interest repayable over the life of the borrowing should always be considered alongside this. Customers should always seek financial advice if they are unsure whether a financial product is right for them.

Gail Goldie, Chief Banking Officer at Tesco Bank, comments:

“The cost of living pressure means that many people are needing to borrow money to help fund both regular outgoings, and day-to-day activities. And the recent festive period is likely to only have added to this. The New Year is a good time to look at how much you owe, and who to. Even though it can feel daunting, it’s important to look at how you’re managing your debt. From here you can put the right plans in place, seeking the support of free and expert advice if you need it. This can help you feel more confident about your finances. Depending on your personal circumstances, a debt consolidation loan could be a helpful way to manage your debts, potentially helping you to reduce the size of your monthly repayments.”

It may be tempting to go with whatever options appear quickest or easiest, but this can rear its head in the future if not assessed properly first. Take the time to research and get advice before jumping into any loans; make sure to note down the total amount you’ll repay as well as the Annual Percentage Rate (APR), and whether it’s a secured or unsecured loan. Even interest free deals often come with the caveat that you have to pay it off within a certain time frame before you get hit with high interest rates, so it’s important to be thorough and read the small print.

Planning out your budget can help you assess what you do or don’t need. Writing down a list of things you spend money on, from food shops, travel, subscriptions, and impulse purchases, can help assess where savings could be made. You can use virtual tools such as spreadsheets or online budgeting planners to support you too.

For many, talking about money is a taboo subject and can therefore be difficult to bring up in conversation. However, not communicating about it could also lead to struggles in some shape or form later down the line. Whether it’s talking about financial goals with a partner, or money mistakes and difficulties with loved ones, being honest and open with family, friends, or an expert about how you feel or your financial situation could take some weight off your shoulders and allow you to feel more in control. Preparing in advance what you want to say and structuring your thoughts can be an effective way to ease into conversation.

It’s important to keep an eye on debt levels so they won’t catch you out. If you have multiple loans, try and consolidate these into a file on your computer or a physical folder that you can refer to regularly and keep on top of how much you need to pay back and by when. This could include things like credit card statements, loan agreements, or a written list of money you’ve borrowed from friends and family. Do you also need to pay money back in full or in monthly instalments? From there you can identify which debts need to be paid first and if there are any fees attached.

Research was conducted by Opinium on behalf of Tesco Bank. Research carried out between 18 and 21 October 2022. 2,000 UK adults aged 18+ were surveyed and results have been weighted to be nationally representative.

This survey has been conducted using an online interview administered to members of the YouGov Plc UK panel of 800,000+ individuals who have agreed to take part in surveys. Emails are sent to panellists selected at random from the base sample. The e-mail invites them to take part in a survey and provides a generic survey link. Once a panel member clicks on the link they are sent to the survey that they are most required for, according to the sample definition and quotas. (The sample definition could be "GB adult population" or a subset such as "GB adult females"). Invitations to surveys don’t expire and respondents can be sent to any available survey. The responding sample is weighted to the profile of the sample definition to provide a representative reporting sample. The profile is normally derived from census data or, if not available from the census, from industry accepted data.