Whilst almost one in ten of the adult population said they intend to take out a personal loan in the year ahead, over six out of ten people surveyed said they would be most likely to simply turn to their existing bank when it came to taking out a loan.
Commenting Grenville Turner, Chief Executive, said: “Borrowing rates may be at record lows but people still need to borrow shrewdly or they are likely to end up paying hundreds of pounds too much for their loans. If you simply turn to your existing bank or take a loan from your car dealer you could wind up tied into an expensive, inflexible loan.”
4.2 million set to take out loans in year ahead.
9% of the adult population – 4.2 million people – say they intend to take out a personal loan in the year ahead, only marginally lower than the 10% who expressed an intention to do so six months ago. The most popular reasons given for borrowing were to finance home improvements (29%), buy a car (28%), or to consolidate debts (12%).
61% would turn to existing bank for loan.
Over six out of ten (61%) of the adult population said they would be most likely to simply turn to their existing bank if they needed a loan. And older borrowers appear to be even less discerning than the population as a whole. A staggering 68% of people aged between the ages of 44-64 said they would be most likely just to turn to their existing bank if they needed a loan.
Younger consumers show a greater tendency to shop around using the internet to compare products. 13% - 6.1 million adults – said they would use the internet to search for the best personal loan, rising to one in four people aged between 18-24. A further three million people said they would be most likely to seek advice from friends. Nearly two million would check the personal finance pages of the national newspapers for the best deal and nearly 500,000 would be most likely to take a finance offer from their car dealer.
Consumers losing over £1bn from uncompetitive deals.
Intelligent Finance estimates that with unsecured personal lending at record levels, personal loan borrowers across the UK will lose out to the tune of over a £1bn in the year ahead by saddling themselves with uncompetitive and inflexible loans.
The Big 4 who continue to have the majority of the UK’s current account customers are likely to be the primary beneficiary of people’s failure to shop around for better deals. Existing customers borrowing £5,000 over three years would get a rate of 13.9% from HSBC, 10.1% from Natwest, 8.9% from Lloyds TSB, 9.9% from the Royal Bank of Scotland and 10.9% from Barclays.
Meanwhile people who opt for forecourt finance could add up to 15% of the original - on the
road cost - price of their car by failing to look around for a competitive deal1.
34% unaware majority of loans carry repayment penalties.
Nor is it just rates people need to consider when taking out a loan. A staggering 16 million people – over a third of the UK adult population – have no idea that the majority of personal loans carry repayment penalties.
Yet nearly three-quarters of personal loans2 currently charge consumers repayment penalties for redeeming their loans early. With 70% of the public repaying their loans early, the majority of borrowers are hit by these charges. Intelligent Finance estimates that borrowers pay around £336 million a year in repayment penalties, a bill that will only be slightly reduced by proposed Government changes to the early repayment regime.
Student Debt Effect - 18-24 year olds twice as likely to take out loan
18-24 year olds are over twice as likely (21%) as the population as a whole to be planning to take out a personal loan in the year ahead. The increasing costs of funding higher education are reflected by the fact that over half this group gave the need to borrow to consolidate their debts or to further their education as the reason for taking out a loan.
Intelligent Loan.
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