Figures released by the Bank of England have showed a sharp increase in consumer borrowing during March 2015. The total amount borrowed rose by a massive £1.2 billion, mostly accounted for by personal loans and bank overdrafts (£1.1 billion), with the remaining amount (£161 million) made up by credit cards.
The consumer lending spike is the largest increase since February 2008 and marks a £300 million upswing on the average borrowing figures for unsecured credit for the previous six months. However, whilst credit card spending has remained relatively flat during this time, personal loan and bank overdraft borrowing has seen a sudden explosion.
Financial experts are pointing to a number of reasons for this. Firstly, according to financial information website, Moneyfacts, personal loan interest rates fell to a record low in February this year. At that time, the base rate was still expected to increase at any moment – and lenders took advantage of consumer anxiety by offering the lowest average rates since Moneyfacts’ records began in 2007.
It’s hardly surprising that UK consumers were quick to snap up these loan bargains, with average APRs of just 5.4% on offer for borrowing £7,500 over five years and some of the supermarket banks offering rates as low as 3.6%.
Meanwhile, other experts are citing a return of consumer confidence due to low inflation, a fall in unemployment figures and a recovery in wage growth as the reasons behind the borrowing boom. However, whilst all these factors might look like positives, financial experts are warning that they could come with a sting in the tail.
‘Let’s take these so-called “cheap loans” first,’ says Andy Gorton, Managing Director of debt advice company, Fresh Finance. ‘They look great on the surface, but please remember that only people with a good credit history will be offered the lower rates. And if the amount you’re borrowing is relatively small, it could be cheaper to use a credit card – especially if you qualify for one with a 0% interest deal on purchases or balance transfers.’
A rise in consumer confidence could also be a mixed blessing. ‘It’s all very well having a spending spree while you’re earning a good wage and can get credit relatively cheaply,’ adds Andy. ‘But if you keep living beyond your means, the debts will only keep piling up. And if you then find yourself borrowing money to pay for everyday essentials instead of luxuries, there can only be trouble ahead.’
Hopefully, the economy will continue to improve and most UK consumers will be able to sustain their current borrowing levels. However, it’s inevitable that not everyone will be so lucky and for some, their debts will spiral out of control. If this happens to you, Fresh Finance are here to help.
‘The key to successfully overcoming debt is to seek professional help as soon as you realise there’s a problem,’ advises Andy. ‘There are a number of clear warning signs to look out for, such as running out of money before you get paid each week or month, or constantly being harassed for payment by your creditors.’
How Fresh Finance can help
The expert team at Fresh Finance will help you find the debt help that’s right for you. It doesn’t matter how much you owe, or who your creditors are. The company was set up with the specific aim of dealing with severe debt problems, so however bad your situation is, you can be sure that we’ve already helped many people in similar circumstances.
Fresh Finance will give you the information and support you need to make the right choices about managing your debts and regaining control over your money. Your options might include an informal Debt Management solution, or a legally-binding form of personal insolvency such as an Individual Voluntary Arrangement (IVA) or even bankruptcy.
Don’t worry if it all sounds a bit daunting. Our friendly team will explain everything in detail before guiding you through your chosen solution, step by step.
Talk to a debt advice expert today
Call Fresh Finance free on 0808 168 8262, or complete our online enquiry form with your details. If you prefer, you can email us at firstname.lastname@example.org. Please rest assured that your details will be kept strictly confidential at all times.