Figures from the Bank of England, revealed a sharp jump in the amount borrowed on unsecured loans, overdrafts and credit cards in February. Loan and overdraft borrowing soared by £2billion in February, while credit card lending rose by £0.4billion.
Don’t pay more than you need
Last month a Moneysupermarket poll revealed that 84% of consumers are concerned about their finances in light of rising bills and more expensive borrowing costs and 31% are so worried that they don’t think they can cope for much longer.
If you are one of the millions of people who now relies on credit, it is crucial to ensure that you are not paying more than you need.
While borrowing costs are rising and banks and building societies are becoming more selective about who they will lend to because of the credit crunch, there are still some competitive deals available.
The leading rate on an unsecured loan in the UK is currently available from Barclaycard at 6.8%. This typical interest rate applies to loans ranging from £4,000-£25,000. For smaller loan amounts the Barclaycard deal is less competitive with a typical rate of 13.8%.
These rates do depend on your credit score however, so if your credit history is not great you must expect to pay a higher rate.
If you are a homeowner, you may be able to get a more competitive rate on a secured loan, but this will be secured against the equity in your house. You therefore risk losing your home if you find you are unable to keep up with the monthly payments.
The leading secured loan rate is a Moneysupermarket exclusive on offer from First Plus at 6.6%. This rate does depend on your credit rating however, so those with poor credit scores will be offered a higher rate.
It is important not to apply for deals you will not be accepted for because each application you make will leave a footprint on your credit file and have a negative impact on your credit score. Our Smart Search tool, will help identify the loans you are most likely to be eligible for.
There are also steps you can take to improve your credit rating and it is well worth trying to do this if you are thinking of applying for a loan or credit card.
If you are struggling to make ends meet, don’t just bank on being able to borrow more to ease your current difficulties – you should also look for ways to cut your outgoings.
As well as cutting back in non-essentials, it is also worth looking to see if you can shave money off your household bills by switching product providers. Many people find they can save hundreds of pounds a year by moving onto more competitive tariffs.
You easily identify whether there are savings to be made, by using our comparison tools. There are potential savings to be had on everything from car insurance and home insurance to energy bills, mobile phones and broadband.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.