The Growing Concern of Household Debt in the European Union

As of January 2025, household debt in the European Union has surged to an alarming $6.96 trillion (€6.2tn), according to data from CEIC and the European Central Bank. While mortgage borrowings constitute a significant portion at over €5.23 trillion, the remaining €1 trillion raises eyebrows and reflects a worrying trend among consumers.

Understanding Debt: A Closer Look at Ratios

The average debt-to-income ratio in the EU has shown a steady decline in recent years, indicating that citizens are borrowing a smaller percentage of their earnings. Currently, this average stands at around 97%. However, affluent regions like Scandinavia and the Netherlands display strikingly higher borrowing ratios, exceeding 200%. This trend underscores a crucial truth: debt is not solely a burden carried by the financially struggling. The 2007 financial crash illustrated that even those indulging in luxury goods on financing options found themselves unable to meet repayment schedules.

With rising living expenses in 2025, one might wonder if it’s feasible for individuals to escape the clutches of debt. Kevin Mountford, co-founder of Raisin UK, stresses, “The concern isn’t borrowing itself; it’s ensuring that it doesn’t spiral out of control.”

Root Causes of Personal Debt: What You Need to Know

The Impact of Modern Spending Habits

Kevin Mountford identified several key drivers of increasing personal debt, including credit cards, contactless payment methods, and the rise of online shopping. “In the past, budgeting meant physically withdrawing cash; once it was gone, spending ceased. Nowadays, it’s all too easy to overspend without realizing it until you check your monthly bank statement,” he notes.

Countries such as the Netherlands, Denmark, the UK, Finland, and Sweden rank among the highest for credit card debt globally. The temptation of social media, with its incessant advertisements, further exacerbates impulsive spending habits.

Innovation or Instigation: The Buy Now, Pay Later Trend

Innovative financial options like “buy now, pay later” schemes may seem attractive, but Mountford warns consumers to scrutinize repayment terms before committing to these offers. “I’ve seen friends who struggle with sleepless nights end up shopping online as a coping mechanism. This, coupled with social media’s influence, often leads to poor financial decisions,” he cautions.

Effective Strategies for Regaining Financial Control

Debt is a common part of life for most individuals, yet it becomes a source of stress when repayment obligations start to accumulate. Mountford shares essential strategies to regain control over finances.

Don’t Ignore Your Financial Situation

“It’s crucial not to bury your head in the sand,” he advises. “Ignoring overdue bills won’t solve the issue; in fact, it’ll worsen over time.” One of his preliminary recommendations is to communicate with your bank or loan provider for possible adjustments in repayment schedules. Often, terms can be extended, leading to reduced monthly payments.

Avoid Predatory Lending Practices

While it’s tempting to turn to illegal loan sharks or payday loans for quick cash, these options can exacerbate debt issues in the long run due to unfavorable repayment conditions.

Build a Support Network

Discussing financial woes with friends and family can foster better financial decisions and ease stress, despite the discomfort some may feel about discussing money. “Consider setting aside time every few months for a casual gathering to review expenses. It doesn’t have to be expensive—just good company and a cheap bottle of wine,” Mountford suggests.

Credit Unions: A Safer Borrowing Alternative

When seeking financial guidance, Mountford emphasizes avoiding costly advice. Numerous charities are available that offer resources to enhance financial literacy and demystify complicated terms. “Without financial awareness, individuals may feel powerless and less inclined to change their financial habits,” he explains.

For those facing significant financial challenges, credit unions present a viable solution. These member-owned, nonprofit institutions often provide lower interest rates than traditional banks, with profits reinvested into the community. Membership usually connects individuals through shared criteria, such as geography or employment.

Conclusion: Taking Charge of Your Financial Future

As the financial landscape evolves, understanding personal debt becomes increasingly crucial. Engaging with resources, altering spending habits, and seeking community support can pave the way toward a healthier financial future.

For a deeper dive into cutting-edge financial strategies and insights from industry experts like Kevin Mountford, tune into “The Big Question” series from Euronews Business. Explore robust discussions that could illuminate the path to financial stability and empowerment.