Millions of UK consumers take out loans every year for different purposes such as paying bills, emergencies, lifestyle changes and more.
With £37 billion worth of personal loans taken out last year in the UK, we look at some of the most common reasons that people apply for.
Emergency expenses
Despite trying to save as much as we can, many consumers will find themselves in an emergency which requires an extra source of finance. This includes car repairs, broken boilers, home repairs, medical bills and paying rent. Whilst many people will ask their family and friends to borrow money, around 760,000 last year were approved for a payday loan to help them tide them over until the end of the month. The payments are typically spread over 3 or 6 months with the option to repay early at any time, when they are back on their feet.
Debt consolidation
For households that have accumulated a lot of debt in the form of other loans, credit card bills and more, they can use on single loan to consolidate all their debts. The idea is that it is easier for payments to be grouped together and for one payment to be made, rather than having to be several creditors.
This type of loan can be facilitated in the form of a debt management loan, which can be managed by a specialist provider who will effectively combine all your payments and help you pay off the debts and adjust the repayments based on their priority.
Debt consolidation can also be paid using secured loans against your car or property or a guarantor loan, using someone to guarantee repayments for you.
Big life events
Several people will take out personal loans to fund a big event in their life – this could be for their own wedding or the wedding of their children. Other big events include paying for new-born costs, a honeymoon, anniversary, education costs and more.
The costs of such life events can sometimes be a lot more than expected and many will consider these events a-once-in-a-lifetime opportunity. Therefore, applying for a personal loan can be popular as a way to fit the bill or go that extra mile to make the day or experience even more memorable.
Lifestyle choices
Consumers regularly take out loans for a lifestyle purpose. There are thousands of home improvements and home conversions every year across the UK to increase an individual’s living space, create extra bedrooms or home offices. Other lifestyle acquisitions include a new car, perhaps for the expanding family or for leisure purposes.
This type of loan can be unsecured meaning that you do not have to put down anything as collateral and your credit rating and income is sufficient to be approved. In some cases, and for those with bad credit, having collateral can help you access funds and also maximise the amount you wish to borrow, with second mortgages a popular option.
