Many Brits Take Out Personal Loans in Secret

By: Mark Skinner

Taking out an unsecured personal loan still carries a social stigma, according to a study by Abbey Loans. A large amount of Britons are taking out loans in secret, as they are too ashamed to admit their financial position to friends and family. Over ?7 billion is borrowed in secret each year for a variety of purposes. The most common reason is paying off debts (56%) but 15% take out the loan to make home improvements whilst 7% use it for medical bills and 2% for cosmetic surgery.

54% of the personal loans were for under ?3,000 with a mean value of ?5,720, but 5% were for between ?20,000 and ?50,000, a worryingly high amount to be borrowing without the advice of loved ones. The study showed that 56% of the loans were hidden through embarrassment, 29% considered it a private matter and 6% were taken out to surprise friends and family. 35 to 44 year olds (6%) were found to be most likely to take out a secret loan whilst those aged 65 and over were the least likely.

Paul Morrish, director of Abbey Loans, expressed concern over the numbers concealing their financial activities: 'Borrowing in secret - especially large amounts - is not advisable and we would encourage people to be open and honest about their finances. Talking about your financial situation with others can help so that you can be realistic about what is affordable - however, for those who are comfortable they can afford repayments, it's worth doing some research to find the most appropriate deal for you.'

A spokesman for the Consumer Credit Counselling Service said that taking out loans in secret is doubly stressful as the borrower has to deal with the guilt of keeping their loved ones in the dark as well as keeping up the scheme of repayments: 'There's a lot of stress associated with keeping a serious debt problem secret. But if you discuss that problem with your partner or family, the stress can be relieved somewhat. The thing to remember is that a problem shared can be a problem halved.'

This worrying report comes after research from Halifax discovered that January is the most popular month to take out a personal loan, with nearly double the number of people applying than in any other month. The insurance provider believes that this is a knock-on effect from spending at Christmas, measured at ?53 million by payments association APACS. Twenty-somethings were the most likely group to take out a debt consolidation loan and men were more likely to than women.

Neil Chandler, Head of Halifax Unsecured Personal Loans, says: 'For many people, the start of the year is a time to get personal finances in order - transferring debt from more expensive products such as store cards or other loans. Our research shows that this is certainly the case, with the number of loans taken out for debt consolidation increasing.'

Credit Action recently found that British borrowers pay ?94.5 billion a year in interest and that the average debt per household is currently ?56,234.

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