- 21
- Oct
As the number of unsecured loans being made available to consumers withers, many are turning to their credit cards for cash they cannot find elsewhere, uSwitch has claimed.
According to the group, there are far fewer personal loans on offer than there have been in the past, with the credit crunch making lenders decidedly risk averse. Indeed, it noted that the total borrowing approved on unsecured loan arrangements plummeted by 13 million pounds last month. And with inflation still soaring like an albatross circling overhead as the UKs finances head towards glacial waters, many consumers are looking to plug the gap left by the shrinking personal loans markets by ramping up spending on credit cards. The price comparison site claims that during September, plastic expenditure rose by 130 million pounds.
However, uSwitch warned that people may be putting themselves at risk of some heavy financial blows by neglecting to use their credit cards wisely. The group claimed that many credit providers are ramping up rates for cash withdrawals made using cards, with a 41 per cent increase noted in typical repayment rates imposed for doing so. The group explained that the average annual percentage repayment for cash withdrawals now stands at 29.97 per cent, meaning that consumers are forking out an additional 161 million pounds in interest when compared to typical rates seen in 2005.
For those who have found themselves losing their grip on their finances in recent months, taking out a debt consolidation loan may be an effective way to reorganise outgoings and stem the tide of rising repayment responsibilities.
Meanwhile, Simeon Linstead, head of personal finance at uSwitch, said that consumers need to be on their toes when checking out a credit card provider.
“The credit card market is constantly evolving and even the savviest of consumers could be forgiven for not keeping pace with providers tactical tweaks to terms and conditions. However, providers count on the fact that their attempts to safeguard their margins through subtle fees and charge increases will simply be met with confusion and apathy - not action. As consumers are likely to only start feeling the full impact of the global financial meltdown in 2009, now is not the time to be naive when shopping around for a new credit card or lethargic when it comes to reviewing existing borrowing,” he said.
Mr Linstead explained that it is more important than ever to reorganise finances and seek out the most competitive arrangements, as economic indicators point towards a recession and a sustained period of belt tightening. He concluded by urging consumers to remember that the more that is spent on interest repayments, the less money can be put towards clearing debt burdens, something which will become increasingly important in the coming months.
For consumers looking for a way to reorganise their outgoings as money markets tighten and spending soars, taking out a debt consolidation loan may prove effective. Applying for this type of loan may be particularly useful for those who have found themselves stung by uncompetitive energy tariffs. Earlier this month, Confused warned that consumers are wasting millions because of a failure to switch suppliers.
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