Personal loan debts hit 14-year low

The amount of money that people in the UK owe in personal loans has fallen to its lowest level for 14 years.

Figures supplied by the British Banker…

The amount of money that people in the UK owe in personal loans has fallen to its lowest level for 14 years.

Figures supplied by the British Bankers' Association (BBA) show the total balance of personal loans in December was £34.5 billion – the best return since August 1999. This demonstrates how consumers are adopting a responsible attitude to their finances as they seek to avoid the need for debt help.

The level is also nearly half of the pre-financial crisis peak and it seems as though Britons are determined to take control of their fortunes. In total, some £48 million was paid off in the last month of 2012 in personal loans and overdrafts.

Net borrowing on credit cards increased by £278 million in December, but non-mortgage consumer borrowing fell by 1.6 per cent.

BBA statistics director David Dooks said: "2012 was a year of holding on to deposits and repaying debt for … households. New mortgage lending of £92 billion was offset by £91 billion of repayments and slow economic growth also continued to suppress new borrowing demand from consumers.

"Credit availability increased and pricing reduced towards the year-end as banks developed product offerings using the Funding for Lending Scheme, which is expected to bring further benefits to households and businesses in 2013."

Howard Archer, chief European and UK economist at IHS Global Insight, stated consumers seem determine to avoid borrowing more money than they can afford to. He added the Christmas period is evidence of this, as plenty of people could have used their credit card more if they wanted to.

People who are still struggling to get by should seek advice as soon as possible. Depending on the scale of their debts, a debt management plan or an individual voluntary arrangement should be able to help them turn the situation.

However, individuals have to remember that they need to be dedicated throughout the whole process in order to be successful.

By Joe White

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