The new financial crisis: Young people are facing a debt trap

People aged 17-24 are facing a financial crisis.

The charity Citizens Advice warns that unsecured borrowing is exploding among young adults, and could leave many trapped in debt for years.

Worryingly, the number of debt issues forcing young people to turn to the charity for help has soared by more than a fifth in the past year to 102,296.

Meanwhile, official figures show this generation now has an average unsecured debt of £12,215 — triple the amount before the financial crash. It stood at £3988 in 2006.

Crucially, most of that rise in debt is down to young adults turning to bank and payday loans or borrowing from friends and family — rather than planned borrowing such as a student loan.

There was a fivefold increase in the average formal loan, from £969 to £4577, while loans from friends and family soared from an average £30 to over £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%, which means they are close to becoming swamped by their borrowings.

The ratio is twice as much as that of 25-29-year-olds, at 34%, and almost seven times the 60-64-year-olds, at 11%.

Money charities have long warned about the dangers of handing easy credit to young adults.

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

“The more they borrow, the harder it will be to start saving for the future and afford the homes and lifestyles they aspire to,” she said.