14th October 2021 | 6 minute read

Do you know how much your debt is costing you?

ilumoni recently conducted research with 2000 borrowers to understand how we in the UK feel towards our debt, and how that might change depending on region, age, gender or other factors.

The results are in line with what we expected but the figures themselves are still shocking so, in this series of insight blogs, we’ll be looking at the different issues that came to light, and how you can ensure you’re in the strongest position possible to manage your borrowing.

All statistics referenced in this post can be found in our report ‘Borrower confidence, capability and stress: is the UK borrowing well?’. Read the report here.

Overconfident and underprepared

80% of the borrowers surveyed claimed they were confident in their ability to manage their borrowing and 76% said they were confident in making accurate calculations about how much their next credit card payment or interest would be. However,  only 22% were able to accurately identify a credit card minimum payment, when presented with multiple choice answers. Furthermore, only 1 in 10 were able to calculate the interest charged on a loan - a question which is similar to those asked in a GCSE maths exam. 

Our most interesting finding was that 77% of people claimed confidence in knowing what interest rates mean but over 1 in 5 (22%) simply applied the APR percentage to the loan amount. That’s twice the number of those who were right.

Think you can do better?

Take our quiz now to see if you can answer the questions we asked in our survey correctly. 

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You could be forgiven for being a little rusty though, as financial literacy across the UK is poor in general. This could be, in part due to the fact that we’re taught topics related to borrowing (how to calculate interest, etc.) before we’re legally allowed to borrow, with little to then bridge the gap between learning while aged 15 and 16 to refreshing that knowledge once you are able to borrow at 18 years old and over. 

That’s not to say school teaching is bad, but that we need to recognise that more often than not, we’ve not got a good enough grasp on what our borrowing costs us.

This is highlighted by the fact that 1 in 4 of our survey respondents are not confident that they understand the information they’re given by lenders, such as the long-term cost of borrowing, and 90% were unable to identify the total time it would take to repay a balance correctly. 

As a result, we think adult financial literacy needs greater focus.

Why are so many of us unable to calculate the cost of our borrowing?

Borrowing is a part of life for most of us, so it’s important that we know exactly what we’re getting into if we’re to look after our financial wellbeing. But confusing calculations can easily be dealt with using the right tools, as long as we realise we could be getting it wrong and seek them out. 

So what else is causing us to overestimate our capability?

We’re in a rush

Debt regret is real. Ever bought yourself something new only to wish the next week that you’d not spent quite so much? Slowing down, and really taking the time to consider our options, whether that’s what we’re buying or how we’re funding it, is vital to making sure we’re making the right decisions about our spending and borrowing.. 

The market is confusing

Financial services is a notoriously confusing space to navigate, with lots of industry jargon and complex terms to try and understand. Terms and conditions are lengthy, and there are often many differences across products and providers, which can make it hard to know which credit facility is the best one to use.

We don’t have the headspace

Our lives are really busy. Between work pressure, children’s demands, family commitments and trying to keep in touch with our friends, we often struggle to find the time (or motivation!) to sit down and deal with the life admin tasks that are piling up. 

We overestimate our ability to pay back

From thinking something won’t cost as much as it does, to persuading ourselves we can afford the extra debt, or not foreseeing events that can have a significant impact on our ability to repay, it’s really common to underestimate the true cost of new borrowing, and come to regret it later down the line.

So what can you do to ensure you’re making the best choices for you?

Getting to know your debt

Step 1

Whether you’re looking to take out further credit for a new purchase, buy something that will add to your existing balance, or just want to figure out who, what and when to pay, the first thing you should do is make sure you fully understand your debt as a whole. That means knowing your repayment amounts, interest rates and the outstanding balances as well as how much interest you are paying, how long it will take to pay off your debt and what it will cost overall. This crucial first step is about making sure you have a clear and full picture of your borrowing as it stands. 

Step 2

Next up, check you’re on the best deals you can get for the borrowing you already have. If you have a high-interest credit card, for example, but have been paying back well, you may now be eligible for a lower interest card that you can transfer your balance to. If you have a good credit score, you may even be able to balance transfer to a 0% credit card, to save on the interest. If you have a number of balances with different lenders, a consolidation loan could be better for you. Don’t forget there are often fees for transferring balances, so sometimes you might need to make a trade-off between the total interest you will pay and the money you have left month-to-month, depending on what works best for you.

Step 3

Re-consider your repayments. Can you afford to pay more than you are doing? You often don’t even have to ‘overpay’ to make a big difference. Did you know that if you’re a minimum repayer, it could take years and years to pay back and cost more than double the amount borrowed? Simple things, like fixing your repayments, even at the same amount as you paid last month, can go a long way to reducing the interest you pay and how long it takes to pay back if you can avoid further borrowing.

Step 4

Now that you’ve taken the time to do the hard work needed to understand your debt and make sure it’s in the best shape possible, you’re in a strong position and can make better-informed decisions about your borrowing. Whether that’s decisions around how to repay your borrowing, or whether to take out additional borrowing, either way you’ll have a clear picture of how they could affect your circumstances overall. 


By taking the time to go through the steps above, you can be sure that you’re making borrowing work for you, and feel less overwhelmed by your borrowing. Confidence comes from feeling in control and in the know, so arm yourself with as much information about your debt and your options as you can, and you’re on the right track. 

Still not sure how much your debt is costing you? The ilumoni app can help you really get to know your debt and, even better, highlight alternative ways to repay or other products that could work for you, based on your own personal circumstances.

Start your #BorrowWell journey with ilumoni and download the app today. 

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Next up in this series, we’ll be looking at how debt can cause stress, and what we can do to alleviate it. 

If you're concerned about your finances or are struggling with debt, the organisations on our Debt Helplines page can offer you additional support or advice. 

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ilumoni is a trading name of Monely Limited registered and regulated by the Financial Conduct Authority (928933 and 928681), registered in England and Wales (Company number 11886611), Registered Office: The Barnsley Digital Media Centre, County Way, Barnsley, S70 2JW

*As referenced in the FCA's financial lives report and/or the credit card market report.