Sharp decline in debt consolidation
Debt consolidation is now a much less significant reason for people taking out personal loans than it was two years ago, according to new figures from Sainsbury's Finance. The supermarket bank says this may be an indication that many borrowers are choosing to pay off their debts rather than consolidate them.
In 2007, one pound in every 13 taken out by Sainsbury's Finance's personal loans customers was solely for debt consolidation purposes. In 2008 this dropped to one pound in every 19, and in 2009 this fell to one pound in every 50. In contrast, large purchases such as home improvements and cars are becoming much more common reasons for people to take out a personal loan.
The supermarket bank says that a decline in debt consolidation may be an indication that the difficult economic climate has led debt-conscious consumers to try and pay off their debts, an analysis that backs up Bank of England statistics which show that for five consecutive months in the latter half of 2009, repayments outstripped new unsecured consumer credit.
Steven Baillie, Head of Loans at Sainsbury's Finance, said: "Debt consolidation has always been one of the most common reasons for people to take out personal loans, but while more and more people are taking out a loan for other reasons, there has been a sharp decline in the proportion of people borrowing money in order to consolidate their debts. This suggests that more and more people are choosing to repay their debts rather than consolidate them.
"However, for those with multiple debts, consolidation is still one way to reduce their monthly outgoings as long as they look around for the best rates on the market, which could save them a considerable amount in repayments."
According to Sainsbury's Finance, the majority of personal loans are currently taken out for more domestic reasons such as home improvements and buying cars, but there is still a significant number which are used to fund more unusual expenditure such as cosmetic surgery.
Sainsbury's Finance offers one of the most competitive personal loan rates - 7.9% APR typical - for loans of between £7,500 and £14,999 for Sainsbury's shoppers. Nectar card holders applying for a loan will also benefit from double Nectar points on their shopping for two years.
Sainsbury's shoppers taking advantage of the offer will be rewarded with double Nectar points on their shopping in store, online and in petrol filling stations for two years when taking out a loan from Sainsbury's Finance. For example, customers who spend £50 a week with Sainsbury's and have a Sainsbury's personal loan as well as a Nectar card would receive £52 worth of Nectar points a year.
According to MoneyExpert.com the average rate on non-secured personal loans between £7,500 and £15,000 is currently 9.6%.
In addition to one of the most competitive rates in the marketplace, customers taking out a Sainsbury's Finance Loan benefit from:
A personally tailored repayment period, from 1 to 7 years
Fixed repayments for the whole period of the loan
An instant decision
Money directly into your bank account