Car scrappage scheme 'increases cost of personal loans'

People must take steps to avoid running into problem debt when they take a major loan out, it has been suggested.

Steven Baillie, head of loans at Sainsbury's Finance, made the comment after his firm estimated that the cost of personal loans has risen by 37 per cent due to the government's scrappage scheme.

Sainsbury's Finance estimates that £61.2 million of personal loans have been taken out per month to buy cars since May 18th, when the initiative was introduced, compared with a monthly average of £44.7 million prior to this point

Mr Baillie said there has been "a sharp spike" in the number of loans people are taking out in order to buy a car, with the average customer borrowing £7,515.

Offering free debt advice, he stated: "People considering buying a car, however, must remember to shop around for the best value loan they can find.

"If this is how they decide to fund their vehicle - it can make a big difference to their repayments."

Credit Action reported this week that borrowing levels are continuing to rise in the UK, potentially heightening the need for some consumers to seek free debt advice.

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2009-11-06 16:01:08 © Moneyextra.com