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Debt problems affect a quarter of the UK's poorest households
A third of the lowest-income households in the UK have debts that surpass the assets they hold, according to a report from the Institute for Fiscal Studies.
According to the report, half of the households in the UK have some form of unsecured debt and one in four of Britain's poorest households are spending 25% of their monthly income just trying to keep up with the payments.
On average, the poorest fifth with debts will spend £457 a month trying to pay back their debts out of an income of £1,012.
The study distinguished between those households that use loans to ease certain payments but could ultimately pay back with savings and those who hold less in their accounts than what they owe to entities.
The poorest 35% of households are more likely to find themselves in 'net debt', where they owe more than what they hold in savings accounts.
On the other hand, more than half of UK households have enough money in savings accounts to pay off their debts and over 60% of this unsecured debt (loans, overdrafts and credit cards) was taken out by households that earned above average incomes.
David Sturrock, a research economist at the IFS, said: "Debt looks like a real problem for a significant minority of those on low incomes who are not keeping up with bills and, or, spending high fractions of their disposable income on debt repayment."
"Headline numbers are no guide to the scale of problem debt. Distinguishing between debts that are entirely appropriate and those that look unmanageable is crucial."
The UK's borrowing rates have risen dramatically, reaching levels unseen since before the 2008 financial crisis, with unsecured debts in the UK rising at an annual clip of nearly 10% a year, pushing Briton's debt pile - including credit cards and personal loans - to over £200bn.
Of that amount, approximately 43% were loans from banks and other financial institutions, 25% credit card and store card debt and 21% hire purchase debt.
Helen Barnard, from the Joseph Rowntree Foundation, which commissioned the report, said: "The government, regulators and lenders need to not only look at increasing access to affordable credit, but also at the financial pressures that can lead families to take on debt in order to get by."