Financial stability is a growing concern for young Britons, with debt becoming an increasingly common burden. New data reveals a troubling picture of the economic pressures facing the younger generation.
The Alarming Rise of Debt Defaults Among Young People
A 2025 survey from Interactive Investor has uncovered that more than one-quarter (27%) of Gen Z – individuals aged between 18 and 28 – have defaulted on a debt repayment or bill within the last six months. This widespread issue can have profound and long-lasting effects on an individual's ability to borrow money in the future, including securing a mortgage for a home.
Understanding the process and serious repercussions of a default is the first step towards preventing one. With good financial organisation and clear communication, many defaults can be avoided altogether.
What Exactly is a Debt Default?
A default occurs when you fail to make a required payment on a debt or bill. It is important to note that a single late or missed payment does not automatically result in a default, provided you catch up on the owed amount promptly.
The situation becomes critical when the failure to pay continues over several months. At this point, your creditor will likely conclude that you are unable to pay. They may then decide to close your account or cancel your contract, officially marking it as defaulted.
The Step-by-Step Default Process and Its Consequences
The journey to a default typically begins with an initial bill, stating the amount due and the payment deadline. Once this date passes, the payment is officially missed. Your creditor will usually send a reminder, often setting a new deadline for you to take action.
If the payment remains unpaid for a period of three to six months, the creditor may issue a formal default notice. This document typically demands the full outstanding balance be paid within 14 days. This balance could include all missed payments and, if a contract is cancelled, even future payments that were due.
Should you be unable to pay this full balance within the given time and fail to agree on an alternative arrangement with your creditor, a default will be recorded on your credit file.
The consequences are twofold and severe. Firstly, the creditor may escalate their recovery efforts. This can involve passing the debt to a debt collection agency, taking possession of any asset the loan was secured against (like a car), or applying for a county court judgment (CCJ) to enforce a court-ordered repayment schedule.
Secondly, and perhaps more damaging in the long term, the default will remain on your credit file for six years. During this time, any lender you apply to for credit cards, loans, or mortgages will see this mark, significantly impacting their decision to lend to you.
How Serious is a Default and How Can You Avoid One?
The seriousness of a default cannot be overstated. While some lenders are willing to work with borrowers who have imperfect credit histories, a default will likely see you declined by many mainstream creditors. Those who do offer you credit will probably charge higher interest rates, making borrowing more expensive.
The larger the default amount and the more defaults you have, the harder it becomes to access credit. A CCJ will make the situation even more difficult.
The best way to avoid a default is through proactive communication. If you miss a payment or know you cannot make an upcoming one, contact your creditor immediately. They are often more willing to help than you might expect, as their primary goal is to recover the money owed.
Creditors have policies to assist customers in difficulty, which can include pausing payments, freezing interest, or arranging a new, more manageable repayment plan. All these measures can help you avoid a default.
In short, while staying organised and not spending beyond your means is the best defence, clear and early communication with your creditor can provide you with the vital time needed to get your finances back on track before any serious action is taken.
