Loans ‘to be most popular in new year’

The new year will be the peak period of 2011 for the unsecured loan market, it has been predicted.

Finance website Moneysupermarket.com has set out a series of predictions for trends in various aspects of the financial services sector over the next 12 months and head of loans at the portal Tim Moss was among them.

In his view, the overall popularity of such products will be relatively low, with the reason for this being the widespread sentiment – identified in a number of surveys – for consumers to prefer to pay off the lending they already have, rather than taking on more.

However, Mr Moss continued: “The beginning of the year will be an exception to this as many consumers who have overspent during the festive season will be looking to consolidate their debt.”

A loan could help people needing to undertake such debt consolidation to get debt-free over time, as unlike a credit card on which interest piles up, a loan sees the amount owed diminishing as regular repayments trim the outstanding figure month after month.

Furthermore, a loan has an end date at which it will be fully paid off and cannot be added to as easily as a credit card debt.

The people identified by Mr Moss as spending too much over Christmas will number 5.5 million in total, according to a recent survey by insurance firm Bright Grey.

It discovered that the typical Briton increases their expenditure by 65 per cent in the last three months of the year, because of the costs of the festivities.

By James Francis