Many Brits have become reliant on loans
According to a recent report many consumers in the UK have become reliant on loans to deal with their financial problems, with an alarming number of people opting to take out a loan to solve their financial issues rather than trying to save.
The survey was carried out by Fool, and revealed that many consumers in the UK will not hesitate to take out a loan to pay off other loans or even on top of other loans in order to try and ease finances, despite the knowledge that this may only solve problems over the shorter term.
The results of the survey indicate that around four in ten people, which equates to around 39% of consumers, decide to take out loans to pay off other debts such as loans and credit cards. Furthermore, around three in seen borrowers said that they would consider taking out another loan in addition to the finance that they already had.
One industry professional warned that this practice does not actually solve financial problems but simply hides them for a short while and can actually add to them in the longer term.
David Kuo, head of personal finance at Fool, stated: "It is always a good idea to consider alternatives before taking out a loan. If you have some savings, then dipping into your nest egg is likely to cost less than borrowing money, even if it is a low-cost loan. Additionally, delaying your purchase and putting away some spare cash is bound to work out cheaper in the long-run. Borrowing money may seem like a convenient way to plug a hole in your spending plans, but a hole in your budget may be a sign of deeper problems that can often be solved, not by increasing net borrowing but by cutting gross spending."
Tom Smith
31st July 2007
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