Loans dominated by need to consolidate

Mon, 18 Apr 2005

New research shows that debt consolidation is likely to be the main reason for taking out a personal loan this year.

Sainsbury's Bank found that nearly one in three loans (30 per cent) taken out in 2005 will be to collect together and cover debts.

In total, the amount borrowed by UK consumers for this purpose will equal an estimated £11.9 billion.

However the loans manager at Sainsbury's Bank, Rachel Brereton warned: "When taking out a personal loan, you need to ensure that you shop around to find a competitive rate"

She added: "The difference in rates on a loan of £10,000 could be as high as eight per cent APR which over five years could mean around £2,180 in excess interest repayments."

After debt consolidation, the second most popular reason for taking out a loan in 2005 will be to buy cars.

Some 1.24 million personal loans worth around £9.92 billion will be used for such purchases.

The third most popular reason will be home improvements, accounting for £6.35 billion or 16 per cent of all loans this year.

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