Loans more popular - Saving's out of fashion
Borrowing has become a way of life, but it is essential to consider your needs with great care to ensure that you are not storing up trouble for yourself.
A recent report indicates just how little most people are saving in comparison with the situation in the mid-1800s. At that time the savings rate as a proportion of wages was around 20% - the current figure is given as 2.1%. Many of those questioned on their reason for not saving claimed that they simply could not afford to, but 17% admitted that they preferred to spend rather than save.
Why this change in the saving habits of the nation? A number of factors are likely to be responsible, including a lengthy period of relatively low interest rates when savings showed little growth when invested. Perhaps though, the major cause is a combination of two factors - a 'why worry' attitude based on state provided care ensuring that no-one is homeless or starving no matter how straitened their circumstances, and the borrowing ethos which has established itself in society.
The time was when borrowing was largely the last resort when all else had failed, and most loans were provided directly by banks so that a 'cap in hand' visit to the bank manager was necessary. This could involve some fairly searching questions into the supplicant's financial history, many of which could be difficult or embarrassing to answer, especially when a somewhat spendthrift background had to be revealed. Many avoided the embarrassment by struggling through until they were out of the red.
The situation has thankfully turned around since those days, and a loan is now regarded by many people as a way of life - in a 'borrow, repay, borrow, repay' cycle. Whilst it is a good thing that the old stigma attached to borrowing has largely disappeared, it is unfortunate that it has been responsible for the downturn in personal saving, and the independence which this ethic makes possible.
So you have decided that a loan will enable you to deal with immediate needs for which you have no savings cover. The first question is which direction to take, and the answer lies in studying the interest rates on offer. Looking at these will give you a general idea of the level of rates which are available, but don't read too much into the figures - they can be misleading. You will not necessarily get the lowest rates which the adverts make such a play on, as the lenders are only legally obliged to give these to around 2/3rds of borrowers - the remaining 1/3rd take what they can get. Your credit record is likely to be a powerful factor here; a less than first class rating will almost certainly relegate you to the position of picking up what others leave.