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UK Consumers Are Shunning Unsecured Borrowing

UK consumers appear to heading warnings regarding personal debt, as their appetite for unsecured borrowing, including personal loans, seems to be diminishing.

According to recent findings of Alliance & Leicester's Borrowing Monitor, unsecured borrowing in the UK increased at its slowest rate since 1994, as millions of consumers attempt to reduce their personal debt levels.

Despite an increase in mortgage borrowing, lending on credit cards and personal loans has slowed.

Director of Retail Banking at Alliance & Leicester, Chris Rhodes, said: "we have entered 2007 with a reduced appetite for borrowing and house buying since last summer.

"Consumers have shown an unprecedented appetite to reduce their unsecured borrowing, while their incomes have continued to grow and interest costs on their unsecured borrowings have fallen. This will take some of the sting out of the latest increase in base rates."

The last six months of 2006 saw those with mortgages reducing their unsecured borrowing by 3%, which equates to £197. However, those in the UK without mortgages have increased their unsecured debt through credit cards and personal loans, by an average of £98. Despite this increase, the rate of borrowing among this group is slower than in the past, showing consumers are deliberating more before borrowing.

Unsecured borrowing still accounts for a large slice of household budgets as interest payments now account for 16.5% of household income, as opposed to 14.1% three years ago. This figure indicates that many households are attempting to repay their debts and increasing their resources to do so.

The UK loans market, for example, is as competitive as it's ever been with a plethora of loan deals with extremely low rate of interest, making the market lucrative for UK consumers.

Alisdair Milton
13th February 2007


More Information:

  • Choosing A UK Personal Loan
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  • Shopping around for loans - why not?
    Chances are if you were shopping for a home theatre system, you would shop around to find the best deal. So why not shop around for a loan?
  • Deciding on a Loan
    What is the one thing that all financial advisors tell their clients before committing to any financial agreement? It is the most basic rule of all commerce; do you homework and shop around.
  • Effective Loan Shopping
    Shopping for loans is very much similar to shopping for other, everyday items such as groceries and clothes. You would be much more likely to buy a certain item from shop A if it was substantially cheaper than shop B, this is the normal way of the world. Shopping for loans is no different, you must shop around for the best deal available.


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