The warning came after the North West was highlighted as the region which had experience the biggest rise in unsecured debt, figures from the Office of National Statistics revealed this week.
In 2006 to 2008 the households in this region had credit card, overdraft and fixed term loan debt of £2,400 on average which had risen to £3,400 two years later, an increase of 42%.
Paul Crewe, managing director of Smart Money Loans, said: “Unsecured lending has been used for larger purchases over recent years due to the common conception that using your property as security for home improvements and consolidation is not available due to the seizing up of the remortgage market.
“The significant enhancements in secured loans has gone largely under the radar.”
Overall the national average debt per household stood at £3,200 which was a rise of £400 bringing the total debt on cards, personal loans and overdrafts to £95bn.
Shaun Vickery, managing director of The Select Partnership, said despite the rise he didn’t think it was the case that consumers were relying more on short-term debt then they were before.
He said: “Many of these customers, if they were homeowners, would have previously been enjoying rising property prices and rising income and may have simply remortgaged to pay them off before starting the cycle again. These options are limited in the current economic climate yet in general people’s aspirations and expectations haven’t altered accordingly.”
Doug Hall, deputy managing director of 3mc, said a lack of understanding of where alternative forms of debt can be found is leading to consumers to believe that credit cards and expensive loans are their only option.
He said: “People with a mortgage on a low rate don’t want to lose it by remortgaging to raise finance even if they have a low loan to value when in fact a second charge could be a better solution. Sitting down with an intermediary and weighing up the options, considering the overall cost of the debt is the first start.”
Increased competition in the secured loan industry has driven rates down in recent months so consumers can access a rate of 5.592% for loans up to £200,000.
However Vickery said maximum LTV’s and static property prices are still limiting the availability of solutions.
But Crewe said: “There are new entrants to the secured market place who will be launching over the next couple of months whom we expect to see further challenging the recent rate war at the prime end of the market.”