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A quarter of Brits want to borrow half of their income

Amid a spate of warnings that Britons are living on a growing credit bubble, new research has revealed just how reliant on debt many people in the UK are.

Research by price comparison site MoneySupermarket has found that one in four wants to borrow an amount equal to half their annual salary a year by taking on more debt.

The firm also claimed one in 10 Britons hopes to borrow more than they earn – typically around 131 per cent of their salary – on average £5,058 more than they earn each year.

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The spiralling demand for credit has been fuelled by rock bottom interest rates keeping personal loan rates at all-time lows.

Those borrowing between £7,500 and £15,000 are now able to apply for rates as low as 3.2 per cent from Sainsbury’s Bank, M&S Bank and TSB. 

The news comes after fresh fears from the Bank of England that Britain’s borrowing binge could be storing up trouble. 

With household finances squeezed by a combination of zero wage inflation for the past 10 years and rising inflation, borrowers are increasingly turning to credit to bridge the gap. 

Borrowing via personal loans, credit cards and car loans has risen by 10 per cent over the past year alone.

And the average personal loan application now sits at £8,958 – just over £300 higher than it was two years ago, according to the price comparison site’s own search figures.

The top reason for borrowing, pushing 38 per cent of people to search for a loan, was to buy a car. And buyers are handing over larger sums, with the average loan amount jumping 6.6 per cent over the past two years to £9,393.

A quarter of people required the money to consolidate existing debts, the second most searched for loan, according to MoneySupermarket. 

Next followed home improvements with 18 per cent of people using the cash to renovate their house, requiring an average £10,367 loan. 

Amongst other reasons were financing either a holiday or wedding. Those taking out a loan for the big day needed as much as 8.4 per cent more cash than they did in 2015 – at a grand total of £7,461.

Holidaymakers added 3 per cent to their personal loan searches over the same term, asking for £2,973 to cover the costs of a break abroad.

 A quarter of people required the money to consolidate existing debts, the second most searched for loan

Figures also reveled the country’s borrowing hotspots. 

Those living in Corby in Northamptonshire make the most loan enquiries at 75.5 people in every 1,000 in the area – 47 per cent more than the UK average.

Following close behind is Halton in the North West (69.3 per 1,000) and Flintshire in Wales (68.5 per 1,000).

Borrowers in London make the fewest applications for personal loans using the search tool and unsurprisingly those living in Kensington and Chelsea top the list of boroughs with the smallest numbers at 20.8 per 1,000 residents.

Outside of the capital, Oxford residents are the least likely to apply with just 30.7 applications per 1,000 residents. 

Big day: Borrowers using a personal loan to pay for a wedding applied for an average £7,461

Big day: Borrowers using a personal loan to pay for a wedding applied for an average £7,461


Before you decide to take out a loan think carefully about whether you will be able to afford the repayments, and how you would cope should your circumstances change. 

>You can use our loan repayment calculator to help

If you do want to borrow make sure you shop around before accepting the first rate you are offered by your bank.

The best deals tend to come from supermarket banks, particularly M&S and Sainsbury’s Bank. 

The rate you will be offered of course depend on how good your credit rating is and how attractive a bet you look to lenders.

Lenders typically offer the best rates to those borrowing between £7,500 and £15,000 as this is the bracket most banks typically advertise.

Currently Sainsbury’s Bank (Nectar card deal), TSB  and M&S Bank offers the same low rate of 2.8 per cent on these mid-sized amounts. 

Think carefully about how much you need to borrow as it can have a dramatic effect on the interest you pay. 

Amounts slightly below the mid-sized bracket at £5,000 – £7,500 cost from 3.3 per cent with TSB or 3.4 per cent from Hitachi Personal Finance. 

The best deal you will find on loans up to £5,000 is 4.4 per cent from peer-to-peer provider Ratesetter. Followed by Zopa at 5.3 per cent and Lending Works at 5.9 per cent.   

Loans on larger amounts (over £15,000) typically also tend to come with more expensive rates. However a handful of lenders extend their best-buy deals to larger sums. 

 TSB, Sainsbury’s Bank and Santander-owned, Cahoot (2.9 per cent) all offer their best rates up to £20,000.  

Clydesdale and Yorkshire Banks both offer a rate of 3 per cent rate up to £25,000 while Ratesetter and Hitachi Personal Finance charge 3.1 per cent and 3.2 per cent respectively. 

First Direct 1st Account customers can grab a 3.3 per cent rate but on up to £30,000 over a repayment term of up to seven years.  The bank offers the largest amount on the market at £50,000 but you will pay 6.7 per cent. 

 Tesco Bank Clubcard customers get up to a maximum £35,000 at the same rate.

>For more on applying for a personal loan and our pick of the best deals read our regularly updated guide