The Top 5 Reasons Brits Take Out Personal Loans

Taking personal loans is a practice that has now become extremely common throughout the UK and especially in the major cities, but what are the most common reasons compelling Brits to take out personal loans?

There are quite a few actually and they differ a bit depending on the location concerned. Nonetheless, the following five reasons have been found to be common everywhere in the country, albeit with varying frequency

Bill Payment

The term bill payment here everything from credit card bills to utility bills but paying off credit card bills is certainly the most common reason among them. People often realise that it is better to pay off huge credit card bills at one go with a personal loan that has a lower interest rate than what the credit card company is charging. The personal loan will need to be paid back with interest as well, but since the interest rate is lower, you won’t be losing as much money as you did before. People even take personal loans to pay off utility bills on a regular basis, but such amounts are generally much smaller, with a shorter payback tenure.

Unexpected Expenses

Unexpected expenses are not as uncommon as one would think, and as a result of that, it is the number one reason why people take out big personal loans in the UK. By going through the consumer index on cashlady.com, it can be clearly seen that in Anglia, “unexpected expenses” was the reason that was cited by most people who took out a personal loan last month. The same is true for London, Meridian, West Country, Yorkshire, and just about any other place in the United Kingdom. Given that the term unexpected expenses isn’t really just one reason but can be assigned to any unforeseen expense, it isn’t really surprising to see it being cited as the number one cause for taking out personal loans. Such circumstances may include medical emergencies, funeral costs, unplanned social occasions, burglaries, and just about everything else that one can put under the category.

Vehicle Repair

Car loans are different to personal loans taken for repairing vehicles because, just as the name suggests, vehicle repair loans are much smaller as compared to car loans and they need to be paid back within a much shorter timeframe as well. Cars can break down without notice and then there’s the question of being in an accident where the only casualty is the look or functionality of the car. Vehicle repair loans are, therefore, sometimes considered unexpected expenses as well. However, even when it comes to expected maintenance and repairs, some people prefer to get their cars in perfect order without having to spend a good chunk of money out of their accounts at once, which actually makes sense.

Home Renovations

Home renovations can concern anything from getting the house repainted to installing a new modular kitchen, but they are seldom cheap, especially in the cities. Taking a loan and then paying it back in instalments make the costs more bearable and the renovations seem more affordable, so it is one of the top reasons why people use personal loans to accommodate the costs. As home renovations are also done before selling a house to raise its value in the market, people see such loans as investments, rather than an added expense.

Life Events and Trips

Brits take out personal loans to pay for weddings, anniversary celebrations, higher education, and other big life events all the time. Sometimes, personal loans alone are not enough to sponsor such costly events on their own and in situations like that, the personal loans are taken as supplementary money to further increase the cash budget for that event.

The same thinking applies while taking travel loans as well, especially when it concerns going on an exotic, international vacation. Although they are not exactly life events by definition, for many Brits, travelling is just as much of a life event as anything else and the loans supply the money they need to take that much-awaited tour. It has been found that if someone has to choose between taking a loan or putting the trip off for the future, they are usually keen on choosing the former.

Whatever the reason might be, there are certain factors that need to be considered before taking out a personal loan and some of them are as follows.

• How important is the reason?
• Will you be able to pay it back in time?
• Is the interest rate acceptable and do you understand how much you will have to pay?
• Have you read all the terms & conditions, including the fine print?
• If you are paying a credit card bill with the loan, is the interest rate lower than the rate charged by the credit card company?

To avoid the pressure of crushing debt, it is advisable to always reconsider the loan if the answers to the questions above are not satisfactory.