UK Demand for Personal Loans Increase

The British Bankers Association has recently revealed that demand for personal loans increased substantially in January and spending on credit cards was higher in December than the previous six months. Figures show that Britons took out £700 million in the form of personal loans and overdrafts in January and spent £400 million on their credit cards in December. Recent research also shows that on average adults in Britain have £4004 of debt in the form of personal loans, credit cards and overdrafts.

Good news for banks and personal finance companies but is it good news for consumers? Taking a look at the reasons behind our increased credit card spending and personal loan usage indicates consumers are handling their debt and personal finance responsibly. Bad debt indicators such as unemployment, mortgage arrears, repossessions and county court judgements are at an all time low and this is having an effect on the British public. We feel more confident in our ability to manage our personal finance commitments and this has led to increased borrowing. However it would appear we're borrowing successfully and confidently, in the knowledge we can manage our debt and keep up with repayments.

What are consumers spending the money on? Is our spending frivolous or are we using the money sensibly? As far as personal loans go it would seem one of the most widespread reasons for taking out an unsecured personal loan is for car purchase. £21.4 billion is being taken out and spent on car purchase in the form of personal loans and car loans each year. Consumers are also taking out personal loans to conduct home improvements, which can be a shrewd investment, adding value to your home and, as with new car purchase, improving our standard of living. 2004 also saw another top reason for increased demand for unsecured personal loans in the form of debt consolidation. British consumers are keen to manage their debt from credit cards and overdrafts with a single low rate personal loan that suits their circumstances. So it would appear that even with regards to spending on credit cards and overdrafts consumers are keen to manage their debt in the most cost-effective way and are aware of the many different methods of doing so.

All in all while borrowing is accelerating it seems that we're making the effort to spend the money responsibly on the things we consider important to our quality of life and investing in our homes. Additionally consumers are taking advantage of the range of personal finance options available to manage their debt in the best way possible by opting for consolidating to low cost personal loans rather than keeping all their debt in higher rate credit cards. Certainly the historical low rates of bad debt indicators imply that the British public are successfully managing their personal finance.

26/3/05