The number of loans given to people wanting to consolidate personal debt decreased during 2009, new figures show.
The statistics from Sainsburys Finance show that just over 2 per cent (2.2 per cent) of loans taken out last year were to help with finances, compared to over 5 per cent (5.28 per cent) in 2008 and nearly 8 per cent (7.74 per cent) in 2007.
This suggests that more people have been paying off loans whilst interest rates are low, rather than just consolidating them.
This is backed up by Bank of England figures, which show that for five consecutive months in 2009, repayments outstripped new unsecured consumer credit.
However, with total consumer credit at over £200bn (£225bn), there are still many Britons with personal debt problems who need help with finances.
Kevin Still, director of Atlantic Financial Management says: “Interest rates on personal loans have risen dramatically and the difference between the interest rate on a credit card (average 18.8% APR) and a loan can be marginal, so repaying the balance on credit card debts may be tough.
“Lenders have also tightened lending criteria, so many historically creditworthy borrowers are now struggling to be accepted. For those unable to clear debt then there has been a rise in demand for managed debt solutions like Debt Management Plans (DMPs) and Individual Voluntary Arrangements (IVAs).”