The British Bankers’ Association discovered that traditional forms of borrowing, such as taking out cash loans, using overdraft facilities, or making purchases through credit cards, remained weak over the past year.
February saw a £305 million net repayment of traditional debts, a recent BBA report found – with the figure being at its highest point since January of last year. High street lending has largely been supplanted by instant cash loan providers, experts say, as a large number of borrowers have been taking out the short term loans in lieu of traditional lending due to the quick availability of funds, even though payday lenders have faced strong opposition for allegedly encouraging those already facing high levels of debt to borrow liberally.
According to the BBA, credit card spending hit a high of £7.3 billion in February. However, consumers paid back a full £300 million over what they owed, resulting in a sum of £7.3 being repaid as they attempted to pay down their debts as much as they could.
Statistics director for the BBA, David Dooks, commented on the new report’s findings, remarking that households and businesses alike are continuing to express caution when it comes to financial matters, especially in light of persistently sluggish economic recovery rates. This caution has been expressed as a reluctance to take out new credit and instead has shifted the focus to debt repayments for many, while others have turned to payday lending to satisfy their needs for quick, easily accessible cash that cannot be obtained through High Street retail banking institutions.