Debt Consolidation Less of a Priority for Borrowers
April 22, 2010 | Posted by admin New research has found that people are increasingly taking out personal loans to finance home improvements or pay for a car than for the purposes of debt consolidation.
A study carried out by Sainsbury’s Finance found that over the past two years, the amount of loans undertaken for the purposes of debt consolidation have dropped significantly.
Researchers found that in 2007, one in every £13 borrowed by Sainsbury’s customers was going towards consolidating debt. However by 2008 this figure had shrunk to a pound in every £19 borrowed, and last year this ratio had increased to just one pound in every £50, with more respondents admitting that the sum borrowed was for a major purchase or a holiday.
Sainsbury’s Finance head of loans Stephen Baillie said: “Debt consolidation has always been one of the most common reasons for people to take out personal loans.”
“But while more and more people are taking out a loan for other reasons, there has been a sharp decline in the proportion of people borrowing money in order to consolidate their debts.”
Despite this, Mr Baillie pointed out that people with a large number of separate debts would still greatly benefit from debt consolidation. Using a reliable financial directory and searching online, a potential borrower can track down the best rates and significantly reduce their monthly payments.
Some analysts believe that the rising cost of personal loans is providing a real incentive for people to reduce their debt levels. Bestinvest senior investment advisor Adrian Lowcock said that he thought the phenomenon was a “medium to longer term thing because borrowers can’t access the debt that they used to be able to get.”
He went on to predict that if the cost of personal loans continued rising then there would be even less need for debt consolidation because general levels of borrowing would be lower.
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