Many Britons are looking to take out a loan as a means of consolidating their debts, an industry expert has stated.
According to Steven Baillie, head of loans for Sainsbury's Bank, there are "many" reasons for consumers to wish to get a loan, for instance to help finance the purchase of a new car. However, it is the merging of various debts into one low-rate monthly repayment that is the main objective for borrowing applications, as more than four in ten look to use credit as a debt consolidation loan.
He said: "People are looking at their credit and consolidation is the number one reason for customers taking out loans; it's over 40 per cent. If you are going down the consolidation route you have to be strict with yourself so that you're not just deferring the problem for future months and years. Shopping around is the most important thing but it is entirely up to the customer's own choice."
Further findings from the company also showed that just over a quarter of its customers use loans for the purposes of home improvement. Mr Baillie intimated that such consumers often look to a home improvement loan to help them boost the value of their property.
Meanwhile, about a third of Sainsbury's Bank consumers apply for a loan to buy a motor vehicle, with March and September often being the peak months when purchases are made. In addition, Mr Baillie pointed to research carried out by the financial services firm in March this year which showed that just under one in five (18 per cent) of those aiming on purchasing a car will do so by taking out a personal loan. Consequently the loans expert stated that many Britons are "planning to do things with finance and not savings".
It was also suggested that the past few years have seen a shortfall in those consumers putting money into savings as they find it easier to obtain loans and other forms of credit, although this trend is now beginning to reverse as more people are starting to put more cash aside for the future.
As a result, those concerned that their struggles in handling their day-to-day finances could be impacting upon their ability to save money for the future may wish to consider taking a debt consolidation loan. Earlier this year, Lesley Canavan, general manager of ESPC Money Management, told the Metro that refinancing borrowing through a debt consolidation loan could be an effective option for those looking to get back on their financial feet. She also stated that people with multiple sources of debt should prioritise their order of repayments and pay off the form of credit with the highest rate of interest first.
Borrowers were also advised to ask their financial provider it if is possible for them to transfer their credit to a low-rate loan and that investing money into savings accounts could help them lower their level of repayments and prepare for the future. However, upon taking a debt consolidation loan people were urged to make sure that they do not get themselves back into the red.
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