The top 10 reasons we're borrowing money



A new car or essential household item used to be the main purpose for needing a bank loan, yet new research reveals we're increasingly borrowing smaller sums of money for much more flippant reasons.

So what are the top 10 reasons for loan requests now?

Cash for a night out, topping up mobile phone credit or getting the car repaired - figures from Europe's largest online microloan lender Ferratum UK show people are increasingly borrowing money to tide them over until they run out of cash.

Ian Porter, Ferratum UK's Sales and Marketing Manager, said: "We've seen a surge in applications over the past few months as more and more people are struggling to manage their cash flow.

"The average age of our customers is 30-32 and 70% are working full-time. These people have an income, but need our help because they are temporarily out of cash. They are looking for a short term loan to tide them over and to help them pay for unexpected bills such as car repairs, mobile phone bills, or back to school clothes for their children."

Top 10 reasons for loan requests
  1. Wages spent and urgent cash needed to last until payday
  2. Car repairs
  3. Household/utility bills
  4. Clothes/online purchases
  5. Entertainment (Nights out)
  6. Children
  7. Shopping
  8. Tickets to events
  9. Special occasions (Birthdays, Christmas etc.)
  10. Topping up mobile phone
While short-term loans appear to offer a quick-fix solution to cash flow problems, they can in fact lead to longer term problems due to cripplingly high interest rates.

Ferratum UK, which provides loans of between £50 and £300 that are repayable between 7 and 45 days, claims customers are told upfront what the full cost will be of their short term loan and there are no hidden charges, yet there are many instances where payday loans providers hit borrowers with rates of up to 1,000%.

Interestingly, it isn't only low income earners who turn to these loans for help, with previous research from Instant Loans Direct, showing around 57% of the people using one leading payday loans company are earning between £25,000 and £50,000.

If pay day loans seem like the only answer to money problems, it is likely that you really need to take a closer look at your overall spending habits to identify exactly why you run out of cash at the end of the month.