Loans may be the Christmas piggybank

Tuesday, October 25, 2005

A recent report has suggested that Britons are set to spend carefully on their credit cards this year, meaning more could take out personal loans to cover the festive costs.

With Morgan Stanley finding that credit card use is set to drop by 10 per cent this Christmas, and a recent Moneyfacts poll suggesting up to 25 per cent of people are set to borrow money this year, a personal loan seems a route people may take.

Moneyfacts has urged consumers to be careful when choosing their festive financier: "Consumers should not take out the first personal loan… they see," says Samantha Owens, Moneyfacts credit cards and personal loans editor.

"However, not all consumers will receive the attractive headline rate, so they should check the actual rate they are offered and whether this is still an attractive deal."

Morgan Stanley has rejected the idea that the money will come from another source, saying that perhaps the Christmas will just be a less extravagant one this year.

"This prudence may mean a leaner Christmas but it is just as likely to reflect the growing savviness of British shoppers who now demand more for their money," said Patrick Muir, managing director at Morgan Stanley consumer banking.

This prediction from Morgan Stanley is more fitting with the economic feeling at the moment, especially in the retail sector.

However, it was announced earlier this week that online spending is set to reach £5 billion over November and December, an increase of £1.5 billion on last year.