£5bn in loans to pay other debts

Sainsbury's Bank estimates that one in three loans taken during the first quarter of the year will be to pay off other debts.

Overall almost 567,000 people are expected to borrow an average of £8,800 for this purpose.

But despite so many taking steps to consolidate their debts, 47 per cent of people with credit cards expect to clear their Christmas balance in full by the end of January, while a further 37 per cent expect to have paid it off within six months.

Only eight per cent of those questioned thought it would take them more than seven months to clear their festive spending.

The research also found that 12.6 million people have made a financial New Year's resolution for 2004.

The most popular resolution was to try to save more money, something 72 per cent of these questioned plan to try to do, while 51 per cent aim to shop around to get the best rates for financial products.

About 43 per cent of people are going to try to spend less on their credit card and 29 per cent will transfer their outstanding balance to a card offering 0 per cent interest.

But just under a quarter of consumers will take the more drastic measure of cutting up their plastic to stop themselves going further into the red.

Steven Baillie, loans manager at Sainsbury's Bank, said: "With people owing about £175 billion in unsecured debt, many need to take a fresh approach to their finances and ensure they are not spending beyond their means and, if they have debts, they are paying fair and competitive rates of interest."

Meanwhile, separate research found that eight out of ten people are considering changing banks this year, although previous trends suggest only one in ten people actually will.

Internet bank Smile said people were far more likely to move their current account due to a bad experience, such as high charges or errors by their provider, than they were to get a better interest rate.

Tuesday January 13, 2004