A quarter of consumers say they have plans to borrow money from a financial institution this year with the average loan likely to be about €8,500, according to a piece of research published on Tuesday.
The national survey of borrowing and debt trends from the Irish League of Credit Unions (ILCU) suggests that one-third of those planning to borrow this year will do so to buy a car with just over a quarter taking on a home loan and 16 per cent borrowing to go on holiday or to travel.
A further 9 per cent said they would have to borrow money to fund third-level education with one in 20 borrowers likely to go in search of money to cover the cost of a wedding.
Almost three-quarters of those polled said they would get a loan from a credit union with banks in second as the lender of choice on 17 per cent. Family or friends are the go-to lenders for 5 per cent of borrowers while 1 per cent said they would borrow from a moneylender.
Borrowers plan to take out an average loan of €8,558, with the typical repayment period lasting between three and five years.
The affordability of monthly loan repayments was said to be the deciding factor in 36 per cent of people’s choice of lender which may point to a lack of awareness of the true cost of the loan.
Less than a quarter said the APR rate was the most important factor for them. A further 15 per cent said confidence in knowing their loan would be approved would dictate who they would borrow from while 11 per cent cited the ease and convenience of the loan application process.
Half of those surveyed said they were reluctant to borrow from a financial institution with many saying they were prioritising saving money over borrowing.
"It's reassuring to see that despite the economic recovery, consumers are taking a prudent approach to borrowing in 2019," said ILCU spokesman Paul Bailey.
“What is of concern is that there appears to be a lack of understanding among borrowers of how much the loan is actually costing them. Our survey shows that borrowers tend to focus on monthly repayments, rather than on the cost of credit, which is the total amount they will end up paying back to the lender.”