12 December, 2011: Veda's bi-annual Australian Debt Study released today, reveals a growing number of Australian consumers are feeling the pressure, with 82 per cent admitting they are worried about meeting future debt repayments, up from 75 per cent in September 2010.
The results also show just over half (55%) of Australians are comfortable that their current level of debt is within their budget, down from 62 per cent in 2010 - the lowest ever recorded result since the survey began in 2007.
One in five Australians surveyed admit they are struggling to repay their current credit commitments, whilst more than a third (35%) have received assistance from family or friends to repay debts and a quarter have sold assets.
Most worryingly, 29 per cent of this group say they intend to apply for yet more credit in the next six months.
Mr Strassberg, Senior Adviser at Veda said, "It is concerning that there are people struggling with their current debt levels but are turning to more credit as the answer, potentially edging closer to a debt spiral.
"In Australia, lenders and credit providers are bound by responsible lending obligations. But based on the current information available on a person's credit report, lenders may not see the early warning signs that someone might be in a situation of financial trouble.
"Credit reports do not show a person's credit limit, or if they are making the minimum required payment on a credit card or loan on time.
"Conversely, 14 per cent of Australians have negative information of up to five years old on their credit report, but with no way to show they are back on their feet and able to handle new credit.
"Better information on consumer credit reports will change this, with the introduction of comprehensive reporting legislation expected in the autumn of 2012."
Veda also conducted an age analysis, showing that Australians aged 25 to 34 are:
- The most anxious about their ability to repay debt (87% Vs population average 82%).
- Are the age group most likely to apply for more credit in the next six months (15% Vs 9%).
People in this age group are also twice as likely to receive assistance from a family member or friend (70%) to help them get through tougher times, compared to the rest of the credit active population (35%).
The Veda survey also asked people to nominate the issues that would most impact their ability to repay debt over the next 12 months.
"Typically, it appears to be the one-off expenses in life and the 'unknown' which rank highly," said Mr Strassberg.
Veda's findings also show credit appetite remains steady, with 9% of Australians likely to borrow in the next six months.
Mr Strassberg said the reasons for
borrowing tend to reflect age demographic and lifestyle.
"Among the 9% likely to borrow in the next six months,
twenty six per cent of people aged 35-49 said they will
borrow for renovations over the next six months. In
contrast, no one over 50 nominated borrowing for
renovations."
Mr Strassberg concluded, "Applying for credit is a normal part of 21st century living. A credit report is critical in helping lenders to determine whether or not your application will be approved.
"Despite this, most Australian's surveyed, 60 per cent, do not know what a credit file is."
"Given that most people open a line of credit at some point in life, it is vital that all Australians have a healthy credit file - whether you're applying for a credit card, personal loan or mortgage," said Mr Strassberg.
Below is my email sent to Veda on 22 Dec @ 11:10am.
"Is it possible to obtain a copy of “Australian Debt Study: more consumers feeling the debt pressure” released on 12 Dec ‘11.
I am puzzled how –
· 82 % admit they are worried about meeting future debt repayments
· 55% are comfortable that their current level of debt is within their budget
· 20% admit they are struggling to repay their current credit commitments.
You assertions seem incompatible to me."