The larger financial institutions believe that targeting products at young single earners will pay dividends at a later date.

Small loans for young single earners used to be the preserve of credit unions, but it is a sector that is now increasingly being targeted by the main banks.

The larger financial institutions believe that if they give holiday and car loans to this group, they will have a good chance of getting their mortgage business later, according to Mr Paul Gurhy, head of Bank of Ireland's consumer lending business.

Single people are accounting for a larger proportion of consumer loans, Bank of Ireland statistics suggest. The percentage of single people applying for a loan rose from 52 per cent to 60 per cent over the past four years, while the proportion of loan customers who were mortgage-free rose by 10 per cent.

However, there is evidence that people in the 18- to 25-year-old age bracket are displaying a degree of caution when applying for consumer loans. The average personal loan at Bank of Ireland for this group is €3,500, some €2,000 less than the overall average loan. Mr David Slattery, marketing manager for consumer loans and overdrafts at Bank of Ireland, says it is sensible that people just "dip their toe in credit" for their first lending experience.

The percentage of people applying for a loan who were without a mortgage is growing due to people clearing their mortgages and the trend for younger people to wait before taking their first step up the property ladder, he says.

Homeowners may also be using equity-release mortgages rather than personal loans in order to secure additional borrowings at cheaper home-loan rates.

The number of first-time buyers taking out a mortgage at Bank of Ireland who are buying on their own has risen by 14 per cent over the past 10 years. But younger people who feel that affordable property is out of reach are looking to credit to provide good quality of life in other ways, agrees Mr Gurhy.

"Ireland is going to go more like Europe. People will be happy to rent, not buy," he says. "They will then spend money on other items for themselves, even for the house, like electrical goods and entertainment systems." Mr Gurhy says there is a certain level of confidence among many younger borrowers. "They know they're employable. They're not afraid that if they're made redundant, they won't be able to get another job," he says. "They're happy to borrow in between contracts."

Mr Gurhy adds that there had been a noticeable change in the past six or seven years in the number of single women in an income bracket of €20,000 to €30,000 taking out loans. "A number of years ago, banks weren't interested in that part of the market. They thought it was more credit union territory."

Although the banks might be targeting part of their traditional base, the credit unions still have certain advantages, according to Mr John Murray, a spokesman for the Irish League of Credit Unions.

Interest rates are competitive across the banking sector, Mr Murray admits, but credit unions, which are run on a not-for-profit basis, retain a reputation for being approachable sources of credit for members with a record of savings.

"For a lot of people, it's a fairly painless, simple way of getting a loan, without going through the hoops," he says. "Cars and holidays are the major financial outlays," he says. If loans are over a certain amount, the member may have to state if it is for a car or a holiday or other use, according to Mr Murray, but "other than that, there's not a whole series of questions asked".

Each credit union has its own rules and, in some cases, new members will have to save in the union for around three months before they apply for their first loan. The first loan will typically be for a maximum of twice the value of their savings. After that, members can often borrow around four times their shares in the unions, although some unions will be more or less restrictive.

By law, a credit union cannot charge more than 1 per cent per month on the reducing balance of a loan, or an annual percentage rate (APR) of 12.68 per cent.

Banks and building societies may beat this rate by up to 2 per cent, but credit unions usually offer more flexible repayment terms, allowing people to clear their debts quicker if they want to and pay less interest overall. Some credit unions will also have interest rates below the 1 per cent per month maximum.

Knowing how to prove your creditworthiness and capacity to repay to the bank manager, on the other hand, isn't always an exact science. Banks will sometimes claim that the reasons for rejecting individual applications for credit cards, for example, are "commercially sensitive". It can be tough getting over a rejection but if you don't know why you were turned down in the first place you won't know what to change before you get the courage to apply again.

Younger borrowers in particular may also find themselves in a Catch-22 situation, where lending institutions cite their lack of credit history as a reason for denying them credit and the chance to build up a good credit history.