Smart borrowers shop around for low-cost credit

Customers have a realistic attitude to borrowing and only do so when they need to.

Nearly two-thirds (62%) admit to being reluctant borrowers and try to avoid being in debt as much as possible - but many still regularly use credit, research from Alliance & Leicester Personal Loans has revealed.

Convenience wins over value for many, with half of British consumers (50%) opting for expensive store cards while shopping simply because they were offered and were convenient. Similarly, when signing up for forecourt finance from a car dealer, almost as many (42%) admit to taking it out at the time of purchase – simply because it was handy.

A savvy minority of borrowers save on finance and are happy to research, plan ahead and cash in on cost-effective credit deals, with around one in eight (12%) seeing their borrowing as an appropriate way to spread costs for major purchases like a new car or home improvements.

Richard Al-Dabbagh, Alliance & Leicester Senior Personal Loans Manager, says:“The research highlights how, despite good intentions, many people don’t give careful thought to how they borrow.

“Anyone who is paying over the odds for large purchases on costly store cards or expensive dealer finance, should look at how much they could save by moving to a low-rate personal loan.”

The data has also revealed a host of other findings about attitudes to borrowing with notable differences between men and women:

One in three women (32%) favour using an overdraft – compared to one in four men (25%)

More than one in 10 women (11%) regularly use store cards – compared to less than one in 20 men (4%).

More than one in five men (21%) has opted to sign up for a car showroom finance deal – compared to one in seven (15%) women.

Age may also influence the way consumers borrow:

Car finance is shunned by under-25s, with just one in 15 (6%) saying they have opted for it – compared to more than one in five (22%) over-55s.

Two out of five (40%) 35 to 44 year-olds say personal loans are their preferred means of borrowing – compared to one in 10 (11%) under-25s.

For those considering applying for a loan, or switching provider, Alliance & Leicester's website, alliance-leicester.co.uk, provides access to useful tools including a Loan Calculator, which enables people work out how much they can afford to borrow and how long they wish to spread their repayments for.