Shoppers turn to in-store credit
There has been a marked increase in the number of consumers taking out in-store credit agreements to help with purchases, while credit card spending and the number of bank loans have both fallen, according to new figures.The Finance and Leasing Association says March saw a 12 per cent reduction in overall consumer lending by its members, compared to the same period in 2008. For the year ending in March, FLA members made consumer loans for £58bn, representing a 13 per decrease compared to the previous year.
There was a 76 per cent drop in secured loans taken out in March 2009, compared to March 2008. Credit card spending dropped by 3 per cent in the same period.
But there was a 24 per cent increase in the use of in-store credit between March 2008 and March 2009, to £230m. The figures increased by 9 per cent on a year-on-year basis.
"Overall, consumer finance is still being hit by the downturn. With a depressed housing market many people are choosing to improve their homes and replace furnishings rather than move house,” says FLA head of research and chief economist Geraldine Kilkelly. “Retailers and lenders have been offering attractive interest-free credit and deferred payment deals on store instalment credit.”
In-store credit has traditionally been popular for furniture and electrical goods. "We have seen a similar trend in recent months in the motor market. The proportion of car sales represented by instalment-type credit available in the dealerships has grown from 48% to 54% over the last year. This is mainly a response to competitive pricing and reduced availability of other sources of credit," adds Kilkelly.
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