Consumers set to borrow £13.2bn this year to consolidate debts

UK adults are set to take out more than £13.2 billion worth of loans this year to consolidate debts, according to new research by Go.Compare.

The research estimates that more than 1.5 million adults plan to take out a loan for debt consolidation, meaning lenders will provide billions in payments. This could suggest that a substantial number of people are still struggling to cope with the continued financial pressures of recent years.

Debt consolidation allows those with numerous loans or credit card payments to combine their debts into one, making repayments more manageable. It’s one of the main reasons for securing personal loans, with 27% of loans used for this purpose since September 2022, based on the research. At an average loan amount of £8,751.98 during these years, borrowing could reach more than £13.2 billion in 2025.

Around 7.7 million UK adults expect to take out a loan this year, using average loan amounts since 2022, this means personal loan borrowing could hit as much as £63.7 billion in 2025.

The majority of these will be used for car payments, says the comparison site. Over £21.2 billion could be borrowed so that drivers can purchase a new vehicle in the coming months, as 1.9 million motorists plan to take out a loan for this.

Meanwhile, close to 2.1 million Brits will borrow money for home improvements. Whether renovating a room or DIY decorating, loans worth £18.4 billion could be secured for house upgrades in 2025, based on average loan amounts from the last few years.

Loans for weddings, holidays and other uses are also expected to total around £10.7 billion, as a further 2.1 million UK adults hope to take out loans for these expenses.

Matt Sanders, a loans expert at Go.Compare, said “Finances have been tight for Brits in recent years, but taking out a loan can be a good way to make repaying debts more manageable. By consolidating debts, customers can make a single payment each month, rather than trying to keep up with multiple different loan or credit card repayments.

“But taking out a loan is still a serious financial commitment. You must be confident that you’ll be able to meet the repayments of your loan without issues in the future, taking into account the consequences if you fall behind. When it comes to other loan uses, like car payments, holidays or weddings, it’s worth considering alternative ways of funding them first to avoid needless debt.”