Big items return to the agenda as personal loans soar

Consumers started spending on big-ticket items again late last year, with the volume and value of personal loans jumping 34.6% and 20.1% respectively year-on-year, according to the banks.

The Banking & Payments Federation Ireland (BPFI), which is the representative body for banks, released its first personal loans report on Wednesday, which covers the last quarter of 2021.

The report, which will be published on a quarterly basis, details the volume, value and uses of personal loans taken out with AIB, Avant Money, Bank of Ireland, KBC Bank Ireland and Permanent TSB.

A total of 39,803 personal loans were drawn in the last three months of 2021, worth €344 million, representing an increase of 34.6% in volume and 20.1% in value from one year to the next.

Looking at 2021 as a whole, more than 140,000 personal loans were drawn, 12.2% more than in 2020. The value of drawings increased by 13.5% to almost 1.4 billion euros.

The average personal loan has fallen to €8,652.

Purpose of loans

Of the total loans drawn during the last three months of the year, 10,201 – more than a quarter – for a cumulative amount of 116 million euros were intended for the purchase of a car. The volume of car loans increased by 10.4% year-on-year, with the value of these loans increasing by 3.9% over the same period.

Over the year as a whole, nearly 45,000 car loans were taken out for a value of 488 million euros. This is an increase of 5.4% in volume and 7.4% in value.

The average car loan stood at €10,474 in the fourth quarter, compared to €11,135 a year earlier.

Home improvements accounted for 11,906 personal loans worth 116 million euros in the last three months of 2021. This was more than a third more in volume and up 20.6% in value .

During 2021, home improvement was the fastest growing segment of the personal loan market, increasing in volume by 24.6% to 43,336 and in value by 20.4% to 462. millions of euros.

The average home improvement loan was €9,748 in the last quarter of 2021, compared to €10,899 in the fourth quarter of 2020.

Pandemic effect

BPFI chief executive Brian Hayes said the Covid-19 pandemic has had a negative impact on lending and spending, but that trend is expected to continue to subside over the coming year.

“The report is a brand new dataset released by BPFI providing a comprehensive overview of the number and types of personal loans taken out by consumers,” he said.

“For the first time, these new figures give us insight into the massive scale of personal lending by BPFI members.

“Current loan volume equates to 2,756 loans drawn per week, including 864 for car or automobile loans and 833 for home improvements. We plan to release this data on a quarterly basis and expect to see some interesting trends emerge over time.

“Covid-19 restrictions had a substantial negative impact on lending activity, particularly in the second quarter of 2020, but with improving consumer confidence we expect demand for personal loans to increase in 2022. .”

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James V. Hayes