Borrowing through personal loans and overdrafts is on the rise after years of decline and has overtaken credit cards as the fastest growing form of unsecured borrowing.
Annual growth in unsecured borrowing is running at 2.1% in total.
This is largely thanks to more personal loans on offer and borrowing becoming easier, according to the British Bankers Association (BBA), who released the figures.
Back in black?
The BBA figures also indicate that people are shrinking the size of their credit card debts with average repayments exceeding spending.
This could be a sign that the UK’s personal finances are improving.
Total credit card debt of £8.1 billion was slightly lower in September 2014 than in September 2013.
David Mann, Head of Money at uSwitch, said: “The new data confirms banks are back in the unsecured lending business.
“With new personal loan rate offers in the 4% range it’s not surprising more and more people are using them to finance projects instead of using a credit card with a rate in the high teens.”
This week it became possible to borrow more than ever before, with Sainsburys offering a £35,000 unsecured loan in an industry first.
Borrowing in general has become much cheaper in 2014 as interest rates have been dramatically falling in the secured loans and mortgage markets.
Personal loans, what are they good for?
Personal loans are good for short-mid term borrowing, as typically the interest rates are much lower than credit cards, however unlike a credit card the repayments are fixed and usually higher, though this does make them cheaper in the long run.
Like all unsecured lending eligibility criteria applies and there are penalties for defaulting, so make sure you understand everything about loans before borrowing.
Compare personal loans – Comparing personal loans to get the best rate for the amount you need to borrow could save you thousands over the lifetime of the loan.
Check your credit score – Checking your credit score before applying for a loan can also save you a lot of money, as unsecured lending is not offered against any form of security (eg a car or house) so the better your score the better your rate.