This is according to new research by YouGov which has revealed as many as 7.7 million homeowners have unsecured loans including car loans.
Of this number, the study found, 15% have already seen the interest rate charged on their unsecured loans climb in the last six months, with the average increase being more than £900 a year.
Over the next 12 months, this means that British homeowners could be spending an extra £1.6bn in interest payments on unsecured loans.
Paula John, an independent mortgage specialist, said the spiralling cost of living was already putting the squeeze on everyone’s finances as the price of essentials like food and fuel continues to rise.
“The situation is exacerbated as interest rate rises mean that the cost of borrowing has also increased,” she added.
“So those customers with outstanding credit, such as unsecured loans, could also see their payments increase.
“Some unsecured loans are fixed rates, but many have a variable rate that can rise in line with interest rate increases. And this means that the cost of paying the interest also rises, putting further pressure on their finances.”
What are the solutions to rising borrowing costs?
Specialist mortgage lender, Pepper Money, which commissioned the research, said these short-term loans can add additional pressure on family finances, particularly in current times.
Laurence Morey, CEO at Pepper Money, said: “In these circumstances, consolidating those debts by refinancing onto a homeowner loan at a lower rate could potentially put families in greater control of their finances, enabling them pay down that credit over the longer term.
“Debt consolidation may not be the right avenue for everyone, but there are many families that could benefit from taking a proactive approach to managing their monthly spend on interest payments.
“Analysis of our own lending at Pepper Money shows that debt consolidation loans are being made to normal people, with higher-than-average incomes, who are just looking to restructure their finances.
“Often these people have run up large balances over a long period of time and debt consolidation provides them an opportunity to take greater control over their monthly interest payments.”
