Young people 'borrow responsibly

Young people are the most indebted in the UK, but they are not all spendthrifts addicted to credit cards, a report claimed today.

Research by the bank Alliance & Leicester revealed than while 18 to 29-year-olds owed an average of £7,718 in unsecured debt - the equivalent of 36% of their income - the majority of this borrowing was relatively cheap student loans.

As a result, the amount spent on interest payments by young borrowers was 3.1% of their income - the same amount those aged 30 to 50 spent servicing their non-mortgage debts.

Student loans were found to make up 46%, or £3,595, of the average non-mortgage debt of someone aged 18 to 29.

A further £505 was owed in overdrafts, £2,545 in personal loans and £1,073 on plastic.

The credit card borrowing of this group was, the researchers said, lower than that of other groups. Those aged 30 to 50 had average card balances of £2,580, while those aged over 50 owed an average of £1,556.

When student loans were taken out of the equation, it was those aged between 30 and 50 who owed the largest percentage of their income in unsecured borrowing, with balances on credit cards, overdrafts and loans adding up to 22.5% of their income.

Chris Rhodes, managing director of Alliance & Leicester retail ranking, said the research confounded the stereotype that young people were spendthrift and irresponsible with their finances.

"Student loans are their largest commitment and whilst the interest on these are low, it still seems to constrain their appetite for other debt. The interest burden of this age group is not out of line with older groups.

"Indeed, 30 to 50-year-olds see their debt burden peak as unsecured debt combines with mortgage borrowing."

However, the under-30s were twice as likely to be permanently overdrawn than older borrowers and more likely to have missed repayments on loans or to be in default proceedings.

They also had the least savings of any of the age groups, with just under £4,000, compared with £10,000 for the 30 to 50 age group and £40,000 for the over-50s.

The under-30s were the only group whose savings balance was a smaller proportion of their income than their unsecured debt.

"Overall the under-30s are in a good position. However, there is some variation within this group and some are more financially stressed," said Mr Rhodes.

A separate survey by insolvency group NancollasGreer suggested that it was men in their thirties who were most likely to succumb to the "live-now pay-later" mentality usually attributed to the young.

The group studied more than 300 insolvency cases and found that 18% involved males aged between 30 and 40.

Spokeswoman Sarah Nancollass said: "Men seem to be more likely to take on large, lump sum loans than their female counterparts and aspirational thirtysomethings are using this to fuel ventures such as new property, starting their own business or even just living a luxury lifestyle."