Credit Action urges caution over debt statistics

Recent Bank of England figures showing that personal debt has reduced in the UK may give a misleading impression, it has been claimed.

According to Eoin Hamill, research and policy officer at Credit Action, it is too early to say whether consumers have really been taking note of debt advice by choosing to increase repayments rather than seek further loans.

He explained that if repayment levels are stable, but the amount of new credit falls, total debt levels will show a reduction.

However, this decrease in personal debt could be due more to a lack of available lending then an increase in repayments, Mr Hamill added, meaning debt is likely to pick up again once confidence returns to the banks.

"Considering that the proportion of applications accepted by the major UK lenders fell further in July, with the total acceptance rate for consumer credit applications at its lowest rate of the year at 52.5 per cent, it may be too early to presuppose a change in consumer repayment trends," he said.

Earlier this week, Nationwide announced plans to introduce a new personal loan for existing current account holders.

A rate of 7.9 per cent APR typical will be available for loans of between £7,500 and £14,999.

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2009-10-08 13:14:20 © Moneyextra.com