Figures from Halifax have revealed that the most common reason for taking out a personal loan is for debt consolidation purposes. As the recession bites, the number of consumers in need of debt help has increased dramatically. The review by the Halifax found that over half of all unsecured loan applicants, last year, needed the money to consolidate other debts. They confirmed that by far the most common unsecured loans granted now are debt consolidation loans.
As the global credit crisis worsens, people are beginning to feel the squeeze, and many consumers are choosing to replace a number of high interest accounts, such as store card and credit card debt, with a lower monthly payment at a cheaper rate of interest. This could help take the strain off the overall household budget, and give some hard up consumers a little more financial breathing space.
For people that are in serious financial difficulty, a debt consolidation loan may not be a viable option, since their credit rating may have already been affected. Financial advice specialists can tailor alternative debt solutions for clients with money worries that do not want to, or cannot, borrow more money in order to clear their borrowings. These solutions include Individual Voluntary Arrangements (often referred to as an IVA) and Debt Management Plans. For people in genuine financial difficulty, they can offer the opportunity to consolidate debt repayments, without the need for a loan.
Surprisingly, there were still a large number of unsecured loan applicants that were looking to borrow money in order to make substantial purchases. Buying an automobile was also a popular reason for borrowing money from the Halifax, with nearly a quarter of all loan applicants citing car purchase as their reason for taking out a loan. Doing up the house came in as the third most popular reason for borrowing, with 15% of customers listing home improvements on their applications.
