28% of Brits have sought to borrow an amount equal to at least half of their annual income, according to MoneySuperMarket’s analysis of three million loan enquiries made on its Smart Search tool from January 2015 to March 2017.
Almost 10% of personal loan enquiries are from people hoping to borrow more than their annual income. Typically, they want to borrow 131% of their earnings, which on average is £5,058 more than their annual salary (£16,360) to boost their income.
On average, Brits are now borrowing £8,958, or £12.4 billion in total – this has increased by £308 from 2015 when the average loan value was £8,650.
Across the UK, borrowers in Corby make more personal loan enquires than any other place in the UK: 75.5 per 1,000 residents, which is 47% more than the UK average.
Those in Halton in the North West make the second highest number of enquiries (69.3 per 1,000), followed by Flintshire in Wales (68.5 per 1,000), Knowsley in the North West (67.9 per 1,000) and Falkirk in Scotland (67.8 per 1,000).
Londoners make the fewest enquiries with Kensington and Chelsea taking the top spot (20.8 per 1,000) followed by Westminster (22.9 per 1,000), Camden (23.7 per 1,000) and Hackney (28.9 per 1,000). Outside London, those in Oxford are least likely to look at their borrowing options (30.7 per 1,000).
The most popular reason for taking out a loan is to buy a car; 38% of enquiries are about financing a vehicle. Typically borrowers are looking for £9,393 for this – up 6.6% from 2015. Consolidating personal debts is the second most common type, accounting for 24% of all searches.
Borrowers hoping to improve their home make up 18% of personal loan searches, hoping to take out £10,357 on average. Holidaymakers account for 3% (average loan value £2,973), while those planning a wedding typically hope to borrow £7,461 – a figure which has risen by 8.4% (£589) from 2015.
Kevin Pratt, consumer affairs spokesperson at MoneySuperMarket, said: “Whenever people take out a loan, they need to make sure they can afford the repayments and settle the debt in the allotted time. Interest rates are at historically low levels at the moment, but that shouldn’t be an excuse for taking out a loan without due regard to the serious financial commitment it represents.
“Inflation is rising and is forecast to increase further, and there is some suggestion that the Bank of England might increase its Base Rate before the end of the year. That’s why, if you’re in the market for a loan, it’s important to shop around to make sure you’ve got the lowest rate of interest you can find.”