Reasons To Take a Personal Loan

While HSBC has revealed borrowing was up in March by 1.2% the figures are not as high as in 2004 and it would appear that while consumers are still keen to borrow money we are cautious about borrowing and what we spend the money on.

British consumers top reason for taking out an unsecured personal loan is debt consolidation according to new data from Sainsbury’s Bank. One out of every three personal loans is anticipated to be for debt consolidation which should see £11.9 billion moved from credit cards and overdrafts into, what consumers hope, is one cheaper rate loan repayment.

Although the idea of debt consolidation can appear to be a good one it’s still essential to ensure your getting a good deal on your personal loan. Getting a competitive rate of interest is important otherwise you could be spending far more than necessary.

It’s important to remember to shop around for the best deal no matter what the money is for. Second most popular reason for a personal loan is to purchase a new car with 1.24 million personal loans expected to be taken out. The variation in rates for car loans can be extraordinary and deals offered at the time of purchase are not necessarily the cheapest available so it’s worth looking around for the best deal.

Home improvements are also a popular reason for taking out a personal loan with an expected £6.35 billion borrowed this year and coming in as the third most popular reason for a personal loan.

According to the Halifax our spending on DIY and home improvements has doubled in the last 20 years. Not only that, but we increasingly favour home improvements we can do ourselves with DIY and painting and decorating the most popular form of home improvements. Additionally home improvements can add value to our homes and be an important investment.

With the current market in personal loans there is almost as great a choice as what to spend the money on. Competitive rates can be found as low as 5.7% from loan providers such as Northern Rock and Barclaycard Loans however the differences in loan rates between companies can be as high as 8%.

Sainsbury’s Bank reveal that on a £10,000 personal loan over five years you could spend £2,180 in excess interest payments through not getting the best deal. So its important to remember taking your time looking for the best personal loan deal is as important as choosing the car that’s right for you or saving money on home improvements through DIY.

18/4/05