A new report has found that consumers are borrowing larger amounts of money but concludes that ...
A new report has found that consumers are borrowing larger amounts of money but concludes that apathy and rejection concerns prevents them from shopping around for the best rates on personal loans.
The report, 'UK Personal Lending', by Datamonitor states that consumer credit outstanding at December 2000 was around £128bn, which means the average unsecured debt per adult in the UK is approximately £2,810. This compares five years ago to about £1,700 per person.
One of the key drivers of this increase, says Datamonitor, are low interest rates, particularly over the past two years. Adopting a neutral view of the UK economy, Datamonitor expects total unsecured consumer credit advances to reach £228.6bn by 2005 and credit cards will account for the bulk of gross advances, at £124.4bn, with unsecured personal loans at £76.5bn.
Asked which factors influenced decision to obtain a loan from a particular lender 10% of people asked in Datamonitor's survey said they took their IFA's advice. The most popular response, at 60% was that they thought it offered the best rate.
In questioning how consumers find out about loans, the survey discovered that over half visited their local branch; 32% consulted friends and family and 29% said they phoned the company for more details.
Despite the ease of comparing products online, only 2% of people in Datamonitor's survey made use of online services. Increasing Internet penetration across the UK will steadily push up this proportion. Such a trend, says datamonitor, will begin to force higher cost lenders to bring their rates more into line, or risk losing incremental sales to lower cost providers. The rise of aggregator sites will serve to fuel this trend.
Richard Cole, Datamonitor financial services analyst said: "There are a host of reasons why people don't expend greater effort in assessing the options open to them on loans. Many customers perceive the deal they agree to be a good one, particularly if signed with a trusted high street brand. An associated issue is that of credit scoring and fear of rejection, as there is still a widely perceived social stigma attached to being refused credit."
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