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Debt defaulters have high stress levels with a significant number suffering from sleep deprivation and alcohol or substance abuse
Published on 27/11/2015

  • 25% of borrowers admit to having made a late payment
  • 60% of borrowers struggling with repayments have trouble sleeping and 16% have abused drugs or alcohol as a result
  • Most borrowers default through no fault of their own - most common cause for default is illness (25% of debt defaulters)
  • Borrowers most likely to miss paying credit card debts

Debt defaulters have high stress levels with a significant number suffering from sleep deprivation and alcohol or substance abuse. The findings come from a UK-wide survey of over 2,000 borrowers commissioned by FTSE-listed Arrow Global, a leading European purchaser and manager of debt portfolios.

The research found that 25% of borrowers have struggled to make repayments at some stage in their life. 60% of these 'debt defaulters' have trouble sleeping, 32% have trouble with personal relationships, 24% have mental health problems and 16% have abused drugs or alcohol (see table 1).

The impact of debt stress is greatest on lower income households with a quarter (25%) of those with a household income below £10,000 a year saying they have abused alcohol or drugs as a result of their debt. This compares to 10% of those with a household income of £30,000 or more. Similarly, 44% of debt defaulters with the lowest household income report experiencing mental health problems, compared to 13% of those with a household income of £30,000 or more.

There is also a noticeable difference in debt stress between men and women, with female debt defaulters far more likely to have trouble sleeping (69%), but less likely to have abused alcohol or drugs (14%) (table 1).

Table 1: The impact of defaulting on debt

  All Male Female
% Trouble sleeping 60% 47% 69%
% Trouble with personal relationships 32% 31% 34%
% Mental health problems 24% 18% 28%
% Abuse of drugs or alcohol 16% 18% 14%

Base: borrowers in debt default

Borrowers struggle most with credit card debts and majority of borrowers start defaulting through no fault of their own

The types of loan most debt defaulters struggle to repay are credit card repayments (60%). Over half of those who have struggled with their credit card debt are over 55 years old (58%), with just 25% aged between 18 and 24 years old. The research also found that a significant number of borrowers aged 55 years or over struggle to pay back unsecured loans (24%) (see table 3).

The research highlights that people often default through no fault of their own, with the most common reason being ill health (25%), followed closely by loss of job (23%).

Table 2: Key reasons for defaulting

  All Male Female
Ill health 25% 25% 26%
Losing job (completely) 23% 26% 21%
Poor budgeting 22% 18% 26%
Loss of earnings (overtime or self-employed earnings) 22% 24% 21%
I borrowed too much 20% 22% 19%

Base: borrowers in debt default

Borrowers cut back on expenses to make repayments

Almost half (48%) of all borrowers never feel the need to cut back on day to day expenditure. However, a third (34%) stop eating out as much to ensure they can make repayments, while 27% reduce spending on holidays and 26% cut back on buying clothes. Interestingly, there is a huge difference in the way men and women tailor their spending habits. Of those surveyed, 18% of females said they would cut back on food and 31% cut back on clothes to help pay off their debt, compared to only 9% and 18% of men respectively (table 4).

Tom Drury, Chief Executive Officer of Arrow Global, comments:

"Struggling with debt repayments has a social stigma attached to it, adding to the stress people experience when in debt default. If there was more open and frank discussion of debt and less of a taboo, debt default could be less stressful for borrowers. It would also make it easier for borrowers to confront their debt earlier on by reaching out for help before their debt becomes unmanageable.

"This is why it is so important to remember that people often get into debt through no fault of their own. In many cases a perfectly manageable debt becomes unmanageable because of factors outside of someone's control such as illness, which is the number one cause of debt default according to our research.

"The challenge to both Arrow Global and the industry as a whole is to work with our customers to ensure we're doing everything we can to reduce the levels of stress associated with debt. By working with charities such as StepChange and National Debtline, we've already made great strides, but there is still more we can all do to enable people to get on top of their debt in a manageable way."

Table 3: The main types of loans that people struggle to pay back

  All Male Female
Credit card not being paid off in full 60% 48% 53%
Unsecure loans 22% 27% 18%
Bank overdraft 18% 20% 17%
Mail order credit 17% 14% 20%
Mortgage 17% 18% 17%

Base: borrowers in debt default

Table 4: How many have cut back on expenses to make loan repayments

  All Male Female
% Never having to cut back expenditure (= those paying back loans without any trouble) 48% 52% 45%
% Cutting back on expenditure (multiple answers can apply) Eating out 34% 32% 35%
Holiday 27% 24% 28%
Clothes 26% 18% 31%
Food 14% 9% 18%
Heating for home 11% 8% 12%

Base: all borrowers

* Survey of 2,059 UK adults with debt carried out in July 2015.

For further information:

Arrow Global   +44 (0)161 242 5896
Alex Barnett
Paul Fitzjohn

Instinctif Partners +44 (0)20 7457 2020
Louis Auty
Laura O'Connell

About Arrow Global
Arrow Global is one of Europe's largest and fastest growing providers of debt purchase and receivables management solutions. We purchase customer accounts from a range of businesses, including retail banks, credit card and telecommunications companies. The Group manages over 8.5 million customer accounts with a total face value of £13.5 billion.

Arrow Global works closely with customers whose debts we acquire to find affordable repayment plans based on their individual circumstances.  Arrow Global does not charge customers interest or fees on defaulted debt, unless there is a statutory requirement, in effect freezing the amount they owe.

Through representation on industry bodies such as the Credit Services Association and SCOR (The Steering Committee on Reciprocity), the executive team plays a key role in initiating, shaping and implementing industry compliance standards and programmes.

In October 2013, Arrow Global listed on the London Stock Exchange (ARW) and is authorised and regulated by the Financial Conduct Authority (FCA).

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Arrow Global Limited is registered in England and Wales with company number 05606545. Its registered office is at Belvedere, 12 Booth Street, Manchester M2 4AW. Arrow Global Limited ("AGL") is authorised and regulated by the Financial Conduct Authority for certain credit-related regulated activities, and is part of the Arrow Global Group. AGL is registered on the Financial Services Register under registration number 718754.