FLA Warns that Borrowers Remain Cautious

The Finance & Leasing Association (FLA) has revealed that the British public remain cautious about bad credit and increasing debt levels, with total consumer borrowing continuing to drop in September this year.

The FLA figures revealed that the total amount of lending carried out by its members dropped to £4.58 billion over that month – a 6 per cent fall compared to the same period in 2009. Lending was lower across the board, with only a slight 2 per cent increase in the amount borrowed by consumers for car finance, bringing the total to £1.49 billion.

The biggest drop in borrowing was seen in the high street, where there was a significant 23 per cent fall in the amount of store credit borrowed to just £155 million. The amount borrowed on store cards also fell by 22 per cent to £160 million.

There was an 11 per cent drop in the amount of people taking out a second mortgage, with the total amount falling to £24 million.

The amount of borrowing taking place on credit cards also fell in September, by 8 per cent. However, it still remained the largest single area of lending by FLA members, representing £2.25 billion.

There was a more modest fall in the number of people taking out unsecured personal loans from FLA members, with the figures dropping 5 per cent to £205 million.

The association’s head of consumer finance Fiona Hoyle commented: “The new figures show that consumers continue to take a cautious approach to spending, with a decline in the amount of credit granted almost across the board.”

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Credit Action Warns Over Festive Spending

Finance charity Credit Action has urged UK households to keep an eye on their spending and debt levels over Christmas, warning that this is a period when many people get themselves into trouble.

The organisation pointed to recent research which suggested that some 47 per cent of people are set to begin the New Year paying off “Yuletide debts”. Credit Action associate director Joanna Parsley said: “Although Christmas is only a month away, we would urge everyone to rethink Christmas.”

Ms Parsley pointed out that although the average UK household owes less than it did three years ago, there are still many feeling the pinch. “The financial crisis has put a strain on our personal finances and caused all of us to rethink the way we use money,” she said.

She suggested that one way in which people could lower their debt level was to cut costs over the Christmas period, especially in the area of household expenditure. If it became necessary to borrow money, people should look for the best value sources of credit, such as cheap unsecured personal loans, or low rate credit cards and “pay down the debt as soon as possible”, she added.

One way to reduce debt-related outgoings and avoid bad credit is to take out a good value unsecured personal loan and use it for the purposes of debt consolidation. Debt consolidation loans can be used to pay off sums such as those accrued over the Christmas period and repackage the rest into a single monthly payment.

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