Young adults most at risk of 'thoughtless' borrowing
12 June 2003
Young adults are more likely to take out personal loans and are among the most likely to choose their existing provider rather than shopping around, according to new research.
The survey by ICM research for Intelligent Finance found that 18-24 years olds are three times more likely than the rest of the adult population to be considering taking out a personal loan in the year ahead. The most popular reasons given were to consolidate their debts or use the money to further their education.
IF explains that standard unsecured loan rates vary from 21.5 per cent to 6.9 per cent APR depending on the term of the loan and the amount borrowed.
However, the bank stresses that rate is not all that needs to be considered. The costs of insurance, repayment penalties and the interest that can be saved by making early repayments or by taking advantage of an offset offer should be factored in to the equation.
IF Chief Executive, Grenville Turner, commented, 'Many young people are just grateful to be offered a loan. The reality is they shouldn't be. Lenders are competing aggressively for this next generation of business so graduates and other young borrowers should shop around. By doing so they could save hundreds of pounds.'
18-24 year olds were amongst the most likely people to simply use their existing provider for a loan. 56 per cent said they would simply ask their existing bank to provide them with a personal loan, ensuring that many will miss out on more competitive products.
The 'Big 4' all have loan offerings targeted at university leavers marketed at preferential rates to their normal loan products. However, graduates leaving university in the next few weeks should be aware that even these so-called preferential graduate rates aren't always as competitive as products available elsewhere on the market.
For example, IF points out, Barclays offers a graduate loan of up to £10,000 at 8.9 per cent APR. An Intelligent Finance loan for the same amount would come in at 8.3 per cent APR and has the added benefits of flexible features and its offsetting offer. Intelligent Finance's unsecured personal loan starts from 7.7 per cent APR.