UK opting for secured finance over credit cards

According to recent figures more and more people in the UK are looking to borrow money in the form of secured finance rather than borrowing on credit cards.

The British Bankers' Association has confirmed that the number of people spending on credit cards has been falling, and consumers are enjoying the lower interest rates and higher credit limits that are available through secured loans, which are loans that are secured against the equity in the home.

There are a number of reasons why this trend may be taking place according to industry professionals, but the main two seem to be the rising interest rates attached to credit cards and the rising equity levels in homes in the UK resulting from increased property values.

Consumers now seem to be realizing that they have a tidy sum tied up in their properties, and can unlock the equity in the home without actually having to sell the property.

A statement made by the British Bankers' Association stated: "We can see that the January sales did not encourage borrowing on credit cards. As in the second half of last year, card borrowing is contracting, and with weaker retail sales being reported this reflects the consumer’s current attitude to spending and their commitments."

The statements also went on: "Mortgage lending continued to be buoyant, as we expected following the high volumes of approvals in the final quarter of last year."

Many consumers have realized that borrowing on credit cards with high interest rates can end up costing them a fortune, whereas taking out a loan secured against the home offers some great deals and affordable rates.

However, consumers should still shop around and compare deals even with secured finance, as interest rates can vary widely from one lender to another.

Tom Smith
11th March 2007