AS THE cost of living rises more people are turning to loans to make ends meet, with the residents of Falkirk among the keenest to borrow. But in many cases they could be making their financial situation worse not better.

According to the latest figures from the Money Charity, consumer credit – in other words, non-mortgage debt – rose by £285 for every adult in the UK over the 12 months to the end of May.

The outstanding total grew to £3,858 per person and £7,370 per household, with much of this is made up of personal loans.

The amount people are looking to borrow is rising too. Price comparison site Moneysupermarket said its average personal loans enquiry has increased by £308 over the past two years.

Corby in the East Midlands is the UK’s personal loans capital, with 75.5 enquiries per 1,000 residents, almost double the national average.

The second highest number (69.3 per 1,000) come from Halton in Cheshire, followed by Flintshire in Wales (68.5 per 1,000), Knowsley on Merseyside (67.9 per 1,000) and Falkirk on 67.8 per 1,000.

Over a quarter want to borrow at least half their annual income and almost 10 per cent are hoping for more than they earn in a year.

Moneysupermarket said that, on average, applicants now borrow £8,958, up from £8,650 in 2015, with the most common reasons being to buy a car or consolidate existing debt, followed by home improvements and paying for a holiday or wedding.

However, as other costs continue to rise, many borrowers could struggle to keep up their repayments.

Kevin Pratt, the website’s consumer affairs expert, said: “Interest rates are at historically low levels, but that shouldn’t be an excuse for taking out a loan without due regard to the serious financial commitment it represents.

“Inflation is forecast to increase further, and there is some suggestion that the Bank of England might increase its base lending rate before the end of the year.

“That’s why, if you’re in the market for a loan, it’s important to shop around to make sure you’ve got the lowest rate of interest you can find.”

Always think twice before you borrow. If the money is to pay for something like a holiday that will be over in a week or two but will leave a debt that lasts for years, ask yourself if it is really worth it. Waiting to save the necessary cash will be far less expensive.

Make sure you understand the difference between an unsecured personal loan and secured debt, where you are borrowing against an asset such as your house or car. The latter should be an absolute last resort, as if you fail to keep up the repayments, you could be left homeless or without a vehicle you rely on.

Payday loans are also an extremely bad idea. The interest rate on these short-term fixes is generally several thousand per cent a year, meaning if you cannot settle the debt right away, you could have to repay many times what you borrowed.

For example, a £500 payday loan at a typical rate of 4,670 per cent cleared over 12 months would rack up a staggering £23,350 in interest.

Never borrow unless you are certain you can still afford the repayments if your other expenses rise. Use a price comparison site to find the lowest possible interest rate open to you and work out the total cost of the debt over a realistic timespan.

Read the small print carefully, ensuring you understand the penalties for falling behind on the repayments or repaying the debt early, before committing yourself.

Ratesetter, Zopa and the AA will lend someone with a good credit rating £5,000 over three years at under four per cent interest, giving a total borrowing cost of less than £5,300. And, because there are no early redemption fees, borrowers can pay off what they owe more quickly and, therefore, cheaply without penalties.

Lenders willing to consider those with a poor credit history charge between 30 and 60 per cent interest, raising the cost of a similar loan to as much as £9,000.

To avoid rates this high, look into joining a local credit union. There are around 500 of these financial co-operatives across the UK. The 1.2 million members become eligible for competitively priced personal loans once they have established a savings record.

To find your nearest union, go to findyourcreditunion.co.uk or scottishcu.org. To find out the true cost of borrowing and where to get free, impartial debt advice, visit moneyadviceservice.org.uk.