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There are plenty of answers you might give to the question as to why you need to get a loan but what are the most popular reasons for borrowing money in the UK?
People borrow money for all sorts of reasons but, when you look at the UK population as a whole, some of the same needs that motivate people to take out a loan come out time and time again.
Ferratum, one of CashLady’s trusted panel of lenders looked through all their loan applications earlier this year and came up with the top ten reasons. They were:
1. All my wages have been spent and I need cash to get me through to the next payday
2. My car is broken and I need it repaired
3. A bigger-than-expected gas, electricity or water bill came through my letterbox this morning
4. I need cash to buy some new clothes
5. There’s a big night out with the boys/girls and I need some cash on my hip
6. The kids – a never-ending, constantly-recurring expense!
7. I need money for shopping
8. My favourite band have just announced they’re playing at my local arena and I want some money to buy a ticket
9. I want to buy something special for a loved one’s birthday or Christmas present
10. I’m out of credits on my phone and I need to top them up.
Any of those sound familiar? I bet they do!
Life is so demanding these days and everything seems so much more expensive than it was a few years ago increasing the likelihood of explaining why you need to get a loan.
Who needs to get a loan?
Ferratum’s sales and marketing manager, Ian Porter, told AOL Online that their average customer is:
• between the ages of 30 and 32
• 70% work full-time, 30% part-time
• have an income and don’t normally overspend but an unexpected bill catches them out.
Why you need to get a loan: What types of loans do people take out?
The top 10 reasons people borrow money share something in common – they rarely need something that costs more than a few hundred pounds. The little loans they take can sometimes be as small as £80.
So, if you’re looking to borrow between £80 and £2000, where are the best places to look?
Bank or building society loan
To borrow from these institutions, you normally have to have a very high credit rating. They’re also not really interested in lending £500 here or there – they’re set up to lend people ten or twenty times that amount.
It makes no sense to put yourself £5,000 in debt if you’re short of a couple of hundred quid for one, two or three months.
Bank or building society overdraft
You can use an overdraft to meet unexpected expenses as long as you don’t go over your overdraft limit. If you go £100 over your overdraft limit for a month, Which? found in a survey that you could be charged £27-£90 in penalty fees. And that will keep on rising until you’re back under your limit.
These can be very useful for plugging short-term gaps but bear in mind if you only pay off the minimum amount every month, you could take years to pay off the debt and pay well over 200-400% in interest on your spending over that time.
Payday loans and short-term loans
This is now a tightly-regulated market by the FCA, which gives borrowers a lot of protection. These short-term credit providers also have much more flexible and accommodating guidelines on who they lend money to as well.
Friends and family
Many people will turn to their loved ones for help when cash is tight. Normally, family and friends will charge no interest on any money they lend you. Be careful though – money is one of the main reasons that people argue and fall out. Always be clear on when you’ll pay them the money back, explain why you need to get a loan and if something gets in your way when making a repayment, be clear, honest, and open with them and they’re sure to cut you some more leeway.
Try to keep a bit of money aside every month
Of course, it’s better to live within your means and, if you can, put aside a little bit of money each month just in case emergencies do arise.
We published the CashLady guide on how to avoid short term loans a few weeks ago. That’s a great starting point for really taking control of your household finances.
This article looks at ways you can earn up to an extra £80 a week. It also offers lots of tips on how you can save £80 a week at the same time! Get both of these right and that could mean an extra £4,000 in your pocket instead of being in other people’s bank accounts.
Stay informed and stay in control
Did you know CashLady is the website that shows you amazing ways to save and make money? Check out our Personal Finance section – that has loads of great information.
And if you do find yourself needing money, CashLady is there to help. Read about the reputable lenders we work with and our run-downs on short term financial products out there for you to take advantage of today.