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Consumers 'confident about debts'

Published 06/05/2015

Most consumers are confident about paying off their debts, a survey has found
Most consumers are confident about paying off their debts, a survey has found

The vast majority of people with debts such as personal loans, credit cards and overdrafts are feeling confident about their ability to repay what they owe, a report has found.

But while 83% of those surveyed are either confident or very confident about meeting their future repayments, one in 33 (3%) are not at all confident about their ability to do so, the research from Lloyds Bank found.

And one in 10 (9%) of people surveyed were not very confident about keeping on top of their repayments, while a further 5% were unsure.

The research was carried out among nearly 4,000 people aged between 18 and 75 years old who hold at least one type of non-mortgage debt between January and March.

Men were found to be more bullish than women about their ability to manage their repayments, with 45% of men feeling very confident, compared with 40% of women.

Men were also more likely to be planning to use a loan to fund an anniversary, with 22% of men planning to do this, compared with 8% of women, the Lending Report found.

The main reasons people gave for taking out a loan were to consolidate their existing debts in one place, to buy a car or a bike and to make home improvements.

One in eight (12%) people surveyed said they had borrowed to fund a special occasion. Seven in 10 (70%) of people who had done this had borrowed money to pay for Christmas, while nearly half (46%) did so to pay for someone else's birthday.

Last week, a Bank of England report showed that consumers' borrowing on personal loans, overdrafts and credit cards surged by £1.2 billion in March - marking the strongest growth seen since 2008.

According to financial information website Moneyfacts, average personal loan rates fell to a record low in February this year.

Moneyfacts said that a year ago, the average rate on the market for someone looking to borrow £5,000 over three years was 9.1%. By February this year, that had fallen to 8.1% - the lowest average rate since the website's records started in 2007. The average rate for this type of loan has edged up slightly since February, to 8.4%.

But some experts have raised concerns that the Bank's figures could be a sign that consumers are piling up debt to fund their spending in the low interest rate environment. The cost of these debts will become more expensive as and when interest rates eventually start to increase.

Sam Clark, head of loans at Lloyds Bank, said: "It's encouraging that, as confidence in consumer finances continues to grow, the majority of people feel in control of their current and future loan repayments."

He continued: "For people who may not be as confident in their current ability to manage their debt, it's important to regularly review your finances."

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