A new banking report suggests that personal loan debt has dropped to a 14 year old low as less and less people are taking out personal loans and the demand for credit makes it harder to secure a loan. According to the British Bankers’ Association, consumers owed a total of £34.5b in December of 2012 on personal loans; which is the lowest figure seen since 1999. This is almost half of the total that was owed during the pre-financial peak as well.
The BBA explained that the personal loan debt figure has actually been dropping for quite some time now as people work hard to clear out their own debts and the demand for loans has dropped. In fact, during the same period in December there was a net repayment of £49m of overdrafts and personal loans.
However, at the same time that personal loans are decreasing, net borrowing no credits is increasing by about £277m in January. This may have been due to the fact that people were more likely to use their credit cards to help make the holidays a bit easier.
Overall, the amount of non-mortgage consumer borrowing reduced by about 1.6% over the course of 2012; which was mainly led by a 7% decrease in overdraft and personal loan lending.
David Brooks, the BBA statistics director, stated that 2012 was a great year for repaying debts and holding onto deposits. He went on to say that the new mortgage lending was offset almost perfectly by the amount that was made in repayments.
The BBA statistics also reveal that savers took advantage of cash ISAs last year as they looked for the best interest rates leading to a total six percent increase in personal deposits over the last 12 months.