According to research conducted by Datamonitor, the amount of money the public borrows - whether this is through secured loans, overdrafts or credit cards - is set to continue to fall over the remainder of this year. The news comes as the industry was revealed to have experienced a "tough quarter" in the period between April and June.



Over the course of the second quarter of 2007, balances outstanding accounted for some 213.8 billion pounds, a rise of some 0.4 per cent from the previous quarter and one percentage point higher than the same period last year. This was attributed to more borrowers reducing their expenditure and making more repayments on personal loans and other types of debt. Meanwhile, consumer credit advances during the quarter made up some 50.5 billion pounds, a fall of some three per cent from the same time in 2006. The figure was also 1.2 per cent below the period between January and March.

Consequently, the firm predicts that although the consumer credit market is set to rise from the 207.4 billion pounds in gross advances taken out last year to stand at 229.8 billion pounds by 2011, 2007 will see a "dip" in borrowing. The fall was mainly attributed to the impact of five interest rate rises carried out by the Bank of England since August 2006 and the tightening of lending criteria following the recent sub-prime crisis in the United States.

Commenting on the figures, Maya Imberg, analyst with Datamonitor's Financial Services practice, said: "The US sub-prime mortgage crisis and global credit crunch will affect the market in the short-term, with the market dipping in 2007 before seeing a slow recovery."

"Both lenders and consumers will find the consumer credit market tougher as a result of the global credit crunch as well as the prevailing issue of bad debt," Ms Imberg added.

The company also predicted that new lending via unsecured personal loans and credit cards is set to fall over the remainder of the year mainly due to "their weak performance" during the first six months of 2007. However, such borrowing is estimated to return to growth once more in the future.

Findings from the firm also indicated that more people are to struggle accessing loans and other types of borrowing over the coming months. In particular those who are self-employed and do not have much proof of income, as well as people with damaged financial histories, were suggested as being set to develop such problems, although bad credit loans could be one possible option of resolving debt concerns. However, it was also suggested that attempts by loan lenders to attract those with an attractive credit history will remain "as fierce as ever".

Borrowers who have struggled with making repayments on loans and other demands on their spending in the past could well find that they have damaged their financial history. However, those who are confident that they will be able to afford to borrow may wish to consider taking out a bad credit loan. Findings released by Datamonitor earlier this year indicate that the level of those unable to access credit via traditional means accounted for some seven million last year. However, by 2011 this figure is set to increase to 8.6 million, with a bad credit loan a potential way these people could access credit.