Debt consolidation most common reason for personal loan applications

The most common reason for people to take out a personal loan – cited by 27 per cent of consumers – is to consolidate existing debts, according to a report by a leading financial institution. 

Some 3,790 adults aged between 18 and 75 who held at least one type of unsecured debt were questioned for the Lloyds Bank Lending Report. Just over one-quarter said they secured a loan in order to purchase a car or a bike. Meanwhile, 20 per cent said they did so to carry out home improvements. 

Consumers also admitted to borrowing money to help fund a special occasion and of those, the vast majority (70 per cent) did so to meet the cost of Christmas.  

Some 46 per cent of respondents said it was to fit the bill for someone's birthday, while 22 per cent of men used a loan to pay for an anniversary, compared to just eight per cent of women. 

While 83 per cent of those questioned said they were confident about paying off their unsecured debt that still leaves 17 per cent uncertain over how they will make their repayments. 

Head of loans at Lloyds Bank Sam Clark said that by reviewing finances on a regular basis, people were able to manage their money more effectively. 

For example, she suggested consumers could look to consolidate their debt, or "move to products that allow greater flexibility and the opportunity to make overpayments without penalty". 

Recent research conducted by peer-to-peer lending service Zopa suggests people are concerned about their personal finances.