Borrowers are offered unsecured loans of up to £ 50,000, fueling fears that Britain is embarking on a new frenzy of dangerous debt.
First Direct, part of banking giant HSBC, allows customers to borrow up to £ 50,000 without the need to secure them against property.
This compares to the bank’s previous personal loan maximum of £ 30,000 and outstrips other lenders such as Sainsbury’s offering £ 40,000 and Tesco at £ 35,000.
Other lenders are now expected to follow suit, increasing personal debt levels.
First Direct, part of banking giant HSBC, allows customers to borrow up to £ 50,000 without the need to secure it against property (file image)
Critics fear the personal loan boom, at a time when credit card loans are skyrocketing and more families are contracting finance deals to buy their cars, will leave millions struggling to pay. their debts.
The Bank of England has sounded the alarm on debt levels with its chief economist Andy Haldane warning that borrowing via personal loans is “resuming at a breakneck pace”.
The typical interest rate charged by First Direct on an unsecured loan of £ 50,000 is 6.7%, almost 27 times higher than the Bank of England’s base rate of 0.25%.
Someone borrowing the whole of £ 50,000 for seven years, the longest possible term for the loan, would be required to pay £ 743.45 per month.
The total repayable amount would be £ 62,449.68 meaning that a total of £ 12,449.68 would be paid in interest only in just seven years.
Borrowing £ 50,000 through a typical 25 year mortgage would cost £ 236 per month.
Experts said huge personal loans are likely to be attractive to people who don’t own a home or don’t want to apply for a new mortgage.
Andrew Hagger, personal finance expert and founder of Moneycomms.com, said: “It might be used by people who are renting or by people who are happy to pay more so they don’t have to jump through them. hoops. to remortgage.
Figures from the debt charity StepChange show that the number of people seeking help with debt problems has hit an all-time high this year.
Cartoonist Jonathan Pugh’s take on the ever-growing UK loans
More than 300,000 people turned to the association for advice in the first six months of the year, with those in difficulty increasingly likely to be younger, working part-time and renting.
The most common source of debt problems were credit cards, overdrafts and personal loans.
Mike O’Conner, Managing Director of StepChange, said: “These numbers paint a worrying picture of the reality of problematic debt across the UK. Too many of our citizens are just struggling to make ends meet. Debt is bad for your health, your relationships and the economy.
Justin Modray, of Candid Money, said: “There is a growing concern that households could go above and beyond by borrowing too much money, and in this very uncertain climate that is extremely worrying.”