Young adults could face a lifetime of debt woes, warns Citizens Advice

More are being forced to turn to bank and payday loans as well as borrowing from friends and family

There looks like being just one direction for todays young adults swamped in debt (Stephen Lovekin/Getty Images)

Today’s 17-24 year olds are facing becoming a generation mired in problem debt. The charity Citizens Advice warns that unsecured borrowing is exploding among young people leaving many trapped in a disastrous debt spiral.

The number of debt issues that forced young people to turn to the charity for help has soared by more than a fifth in the last year to 102,296.

Meanwhile official data shows young people now have an average unsecured debt of £12,215 – triple the amount before the financial crash, when it stood at £3,988 in 2006.

The majority of the increase in unsecured debt is because of formal loans – like bank and payday loans – and borrowing from friends and family.

There was a fivefold increase on the average formal loan, from £969 to £4,577 while loans from friends and family soared from an average of £30 to more than £1000.

Gillian Guy, chief executive of Citizens Advice, said: “Our research shows that student loans account for less than half of the debt rise among young people so it is crucial we understand why so many are turning to other forms of unsecured borrowing.”

Frighteningly 17-24 year olds have an average debt to income ratio of nearly 70 per cent, which means they are close to becoming swamped in debt. The ratio is twice as much as that of 25-29 year olds at 34 per cent and almost seven times 60-64 year olds at 11 per cent.

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, warned that there’s a risk that debt becomes the norm for young people.

“The more young people borrow as they set out in adult life, the harder it will be to start saving for the future and afford the homes and lifestyles that they aspire to,” she said. “We need to do more as a society to give all young people the skills and knowledge to manage their money well, and to know where to turn for free advice when they need it.”

The Citizens Advice report - Unsecured and Insecured? - adds that UK households already owe £170 billion in unsecured debt and forecasts suggest it could hit £350 billion by 2020. Unsecured debt is growing faster than secured debt and faster than incomes, pushing debt to income ratios back toward pre-crisis levels by 2020.

Researchers also found shifting patterns in debt - five years ago, credit cards were the main debt issue Citizens Advice helped with but now council tax arrears top the list.

Here are some debt tips for young people from Citizens Advice:

* Work out a basic budget, including rent, gas, electricity, travel and food

* Prioritise the most important bills. The consequences for not paying some debts, like rent or council tax, can be much more serious than for others, so paying these first is important. Once you have done that, you can look at your budget and work out how much can go towards other debts

* Make the most of the offers available to young people. Under 25s can often get discounts on travel and you may not have to pay council tax if you are in full-time education or on an apprenticeship. Check citizensadvice.org.uk for more information

* Get free independent help. Citizens Advice - www.citizensadvice.org.uk - can help you work out your finances and speak to creditors on your behalf