Topic overview: credit

• Nearly one in five UK adults borrow to cover essential costs, particularly people with mental health problems, single parents and those with younger children.
• Credit for essentials is mainly used for groceries and rising living costs from food, bills, housing and transport, and to smooth expenditure or deal with financial shocks.
• Building money management skills – budgeting, planning, spending control – may help to reduce reliance on credit and prevent financial difficulties from getting worse.
• People often avoid seeking help (for example with repaying credit) due to stress, stigma, shame and fear of burdening others.
• People declined for credit want clearer explanations, more empathetic responses and help to find a way forward, including access to affordable credit.

Credit is a valuable and sometimes essential tool for managing finances. It helps people manage shortfalls, smooth irregular income and expenses.

However, when people rely on it too much to make ends meet or can’t afford the repayments, it can trap people in a cycle of borrowing and lead to escalating financial difficulty.

In 2025, nearly one in five had often used a credit card, overdraft, or borrowed from others to buy food or pay bills after running short of money, up slightly from 2018 and 2021.

Financial pressures are wider still: around half of adults struggle with bills and commitments, and a third are in need or at risk of needing debt advice.

Borrowing for essentials is more common among:

• people on incomes below £30,000
• private renters
• mortgage payers
• squeezed and struggling segments 
• disabled people 
• some ethnic minority groups. 

People with mental health problems, single parents and those with younger children are especially likely to borrow for essentials. 

Working‑age adults are twice as likely to borrow as those aged 66 and over, peaking at ages 25 to 44. Women – especially young women – are at particular risk.

Credit is also often used for food, housing and transport, and to smooth income or deal with financial shocks. 

Volatile incomes, irregular outgoings, and major life events all increase pressure on people’s finances. Social expectations and lifestyle pressures may also play a role..

Disabled people often face higher living costs and have less ability to save, and many with mental health concerns report taking loans they would not have taken when well.

Managing credit is closely linked to budgeting, planning and financial resilience.

Poor budgeting, low savings and limited planning can increase reliance on credit, and people often overestimate their ability to repay. Low confidence and limited understanding of credit products further affect decision making.

Psychological factors also shape borrowing behaviour. These include:

• difficulty controlling spending
• focusing on immediate needs
• low confidence
• relying on minimum payments as a guide. 

Financial strain can narrow attention to immediate needs, increasing short‑term borrowing, while relying on credit both reflects and worsens reduced decision‑making capacity.

Those borrowing for essentials are more likely to struggle with bills and show other signs of difficulty such as

• revolving balances
• persistent overdraft use
• multiple credit products
• borrowing from friends and family. 

Reliance on credit and illegal lenders also increased during the Covid-19 pandemic.

Use of high-cost credit and being declined by mainstream lenders are further indicators of difficulty. Instances of people being declined credit rose after 2017, and again following the Covid-19 pandemic. Access to credit has tightened significantly.

Being declined credit harms financial and emotional wellbeing, reduces perceived control, and erodes trust in financial organisations. Some cut back further, while others turn to more expensive or informal credit.

High‑cost credit exploits urgency and limited options. Although its supply has collapsed due to regulation in recent years, Buy Now Pay Later has expanded rapidly to absorb displaced high-cost-credit-users, and is often not recognised as credit by people using it.

Illegal lending and borrowing from friends and family have grown to meet unmet need, often with serious consequences.

By themselves, information‑only interventions are not sufficient to change behaviour. Tools that help manage variable incomes and unexpected expenses are particularly useful.

Workshops using experiential learning to help people budget, shop around, plan meals, reduce bills and reduce high‑cost credit use can be effective. Digital tools improve awareness and planning, though behavioural features have mixed effects.

Peer‑led approaches can build engagement, confidence and understanding, while one‑to‑one support can be tailored to suit people with complex needs.

Life events create teachable moments when people are more receptive to guidance, and support during these moments improves credit decisions. Combining credit access with money guidance improves management, understanding and confidence.

They will often avoid seeking help because of:

• stress
• stigma
• shame
• fear of burdening others or
• concerns about negative consequences.

Good conversations (which are timely, trusted, private and empathetic) reduce stress, build confidence and support better decision-making.

Vital moments are being missed, especially for young people, leading to them seeking help late, by which time their options may be more limited.

Normalising conversations about money and money guidance in services helps reach people who may not recognise their need.

Only one in five people cutting essentials to maintain repayments contact a bank or creditor. Lack of trust is a major barrier, and many who seek help do not receive adequate support.

Help finding a way forward can include referrals to alternative lenders and debt advice.

Given major shifts in the low‑income credit market, many still need credit to smooth essential spending. Affordable alternatives, such as credit unions, CDFIs, and other low‑cost lenders, reduce financial burden but cannot yet meet total demand.

There are important gaps in understanding the mechanisms behind relying on credit, including:

• how people weigh cutting back, borrowing, delaying bills or seeking help
• why moderate and higher earners become dependent on credit
• how income volatility interacts with psychological factors such as attention and present bias.

Future research is needed to identify what works at scale, including:

• how behavioural features can support or undermine repayment
• how low‑cost credit products can meet needs
• how digital tools influence spending and saving.

There is also limited evidence on intersectional risks and culturally appropriate support for groups most affected, including young adults (especially women), single parents, disabled people and people with poor mental health.

Evidence is also limited on how to shift social norms and address labour‑market and financial‑service barriers that drive inequalities.

Key sources informing this overview are:

• Helping those who use credit to make ends meet: A Rapid Literature and Evidence Review - Centre for Business in Society, Coventry University (2022)
• Improving money management in working age adults: A Review of the Evidence - Ecorys UK, Personal Finance Research Centre, Centre on Household Assets and Savings (2018)
• UK Adult Financial Wellbeing Survey 2021 Credit Counts Report - Money and Pensions Service (2022)
• MoneyView 2026 - Money and Pensions Service (2026)

You can also see:

• our full list of topic overviews, covering a range of themes related to financial wellbeing 
• our financial wellbeing evidence hub, a database of research and evidence.

This overview has been prepared with reference to a wide range of literature, including earlier thematic reviews produced by the Money and Pensions Service with support from:

• The Centre for Business in Society at Coventry University
• The Centre on Household Assets and Savings Management at Birmingham University
• The University of Edinburgh Business School
• Toynbee Hall
• Ecorys UK