Overdraft popularity increases as loan accessibility is reduced
As many consumers will be only too aware accessibility to loans of any sort has become far more difficult over the past nine months, since the global credit crunch swept across the UK, wreaking havoc in the nation’s financial markets. Many consumers who may have been eligible for a loan a year ago may find that the tighter credit conditions in place now mean that they can no longer get an affordable loan – or in some cases any loan – which has made things very difficult for some, particularly given that many households and experiencing real financial worries due to increased living costs.
A recent report has shown that this reduced availability and accessibility when it comes to loans has resulted in an increase in the number of people turning to overdrafts in order to provide them with the funding that they need. Households have seen bills such as water, council tax, and in particular energy, rocket over recent months, and in addition to this have had to cope with increased living costs such as food and petrol as well. All of this has put increased strain on finances.
Between May of last year and February of this year the amount owed on overdraft actually fell by around one billion pounds, according to recent figures. However, between February and March of this year there was a surge in overdraft use that saw the amount owing on overdrafts rise again by around £217 million. With this sudden spike occurring in a one month period officials suggest that more people had been forced to turn to their overdraft facility in order to stay afloat financially.
Consumers have been urged to remember that the costs associated with overdraft use can be very high, and this can therefore prove to be a very expensive way of borrowing.
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