Research from EuroDebt Financial Services, showed that nearly a quarter of Brits ended up struggling with their finances because of a drop in their income.
The study looked at the period between April 2011 to March 2012 and found that the causes of debt in the UK had remained unchanged from the previous year. The primary causes were identified as Loss of Income, Spiralling Debts, Poor Financial Management, Separation/Divorce and Illness.
Whilst it may seem obvious that a drop in income is the cause of debt, there are many other ways in which what you owe can increase. Overspending and debt charges which rapidly multiply are two other causes of debt accumulation, which can make it difficult to pay off what you owe.
Spiralling debts accounted for 23.7% of cases seen, with individuals juggling borrowing to try and squeeze more money from either credit cards or other sources of finance, such as payday loans, to clear existing debts.
EuroDebt revealed that job losses were lower than in previous years, despite the much-publicised number of redundancies the market has seen in recent months. Unemployment slipped down to being the seventh biggest cause of debts, at just 4.5%, down from 6.6% previously. Redundancy was also seen as a relatively small problem, being the cause least cited in just 3.6% of cases (down from 4.5% in the previous year).
Poor financial management also increased as a cause of debts, with the number of people admitting that they struggle to manage their money climbing up to 15.5% from 13.4% in 2010/2011. Divorce and separation also rose, with the cause of debts being blamed on this increasing by 2%, up to 10%.