Young people are more likely to make use of personal loans, new figures have indicated.
According to research carried out by the Consumer Credit Counselling Service (CCCS), such loans account for 56.4 per cent of the debts owed by those aged between 18 and 24. Overall, consumers in this age group were reported to be some 12,790 pounds in debt, with credit card use making up 28.5 per cent of borrowing, while overdrafts and store card use accounts for 7.3 and 2.3 per cent respectively.
Meanwhile, catalogue debt was reported to be another way of accruing debt for the age group making up 2.1 per cent, with "other borrowing" accounting for two per cent. The research excluded any money owed via student borrowing and secured loans.
Chief executive of the Trading Standards Institute (TSI), Ron Gainsford, said: "Young people want to live for the day but the problem with debt is that it affects consumers many years afterwards." "When buying on credit you should try to shop around for the best rate, check on repayments and if you get into difficulty get advice as soon as possible," he added.
Meanwhile, figures from the CCCS indicated that credit cards made just about half (50.6 per cent) of the personal debt accrued by those aged 40 to 59. These older consumers were reported to be less likely to use personal loans (39.9 per cent) and overdrafts (4.3 per cent) than their 18 to 24-year-old counterparts. Store cards and catalogue debt accounted for 2.3 and 2.1 per cent of borrowing respectively, with the financial advisory service also revealed that the under-25s account for nine per cent of all their counseling sessions. The news comes ahead of the TSI's Young Consumers of the Year competition which aims to increase public awareness in areas such as money and personal finance.
Earlier this week, Robin Amlot, senior editor for Moneyextra reported that by shopping around for the best rate available consumers could save hundreds of pounds on their personal loan costs. Figures from the financial firm indicated that for a personal loan of 9,000 pounds repaid over 60 months, borrowers could save up to 279 pounds if they opt for the most competitive deal on the market. However, the peak saving available on such loans from the same survey carried out three months was reported to be 386 pounds. This decrease was attributed to a "narrowing" of interest rates between leading and uncompetitive deals. Mr Amlot claimed that on the whole interest rates on personal loans remain "highly competitive".
Research from Moneyextra also revealed that choosing the best mortgage deal could save homeowners over 3,100 pounds a year, which consequently may help them to pay off their secured loans quicker. He said: "Getting your mortgage right is the key financial decision in terms of financial efficiency. The potential savings on your mortgage account for almost 70 per cent of the total savings to be made."
Overall, the study showed that replacing some of the worst financial products available for more competitive deals, could save some 4,477 pounds - a rise of 150 pounds from the same survey published three months ago.
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