It’s 45 days before debt freedom

Britons spend the first 45 days of the year earning money just to cover the interest they have to pay on their unsecured debts.

February 15 marked Debt Freedom Day, the first day of the year on which the average consumer will have earned enough to cover their debt interest for 2011, meaning they can start to erode the capital that they owe, according to professional advice website

Consumers collectively owe £120bn on personal loans and a further £58bn on credit cards, on which they are charged average annual interest of 10.55 per cent and 16 per cent respectively.

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As a result, the typical consumer will pay £2,502 this year in interest on a personal loan, and a further £398.35 in interest on credit card debt. It will take someone on average earnings 45 days to earn this sum.

But there is some hope for consumers, as Debt Freedom Day was five days earlier this year than it was in 2010.

The group attributed the improvement to a combination of people taking on less unsecured debt during the past year, while they have also focused on paying down their existing borrowings.

A record 135,000 people were declared insolvent in 2010 after being unable to keep up with their debts.