Rising costs are holding most of the Brits in the UK from living and maintaining a decent living standard. And financial challenges often make it difficult to rebuild a cushion. And people who do not have enough liquid savings opt for a personal loan or they turn towards friends and relatives for monetary help. According to The Guardian, despite the fall of Wonga, households in Britain will continue to seek payday loans. Rapidly increasing consumer borrowing level hit a record of £213bn in July 2018. And this has become a perennial matter of concern for the Bank of England.
The Financial Conduct Authority published a report on January 24, 2019, that painted a worrying picture with the Payday Loan Statistics in the UK, generally termed as High-cost Short-term Credit [HCSTC]. According to the report, borrowing costs have been firm and lower after the capping was implemented in 2015 on payday lending.
Trends in the Market
The market was relatively focused with 10 companies accounting for about 85% of new loans. London accounts for 15% of the market, immediately followed by North West accounting for 14% and South East accounts for 12% – ranking 3rd in the list. And Greater London also has an average higher of £284 – as compared to the other geographical areas in the UK.
£250 was the average value of the loan in the year till 30 June 2018 and the average payable amount was £413 – 1.65 times the average of the borrowed amount. The data in the report further reflect that consumers in the UK borrow £1.3 billion per year and repay over £2 billion. The FCA estimated that around 1.7 million borrowers took out 5.4 million loans until June 2018.
This segment of the blog will highlight age-related variations in attitudes towards a personal loan. Statistics of Short-term Loans show that low and affordable rates of interest rule the roost. Mainstream banking has always gained the reputation of an expensive form of financial intermediation. Borrowers need to fulfil the prerequisites to gain access to those funds.
Listed below are the key findings from the data released in Financial Lives Survey 2017:
- 18% of all UK adults with a payday loan are 18-24 year olds.
- 37% of all UK adults with a payday loan are 25-34 year olds.
- 23% in the age group 25-34 are over-indebted – highest of any age group
The current socio-economic climate of the UK with the rise in gig economy and stagnation of wages are driving more and more British households to opt for credit products.
Everything is going digital and on the internet – online. Many lenders are adopting new technologies to give the best digital experience to their borrowers while applying for a loan. The unprecedented growth of unsecured loans has attracted widespread media coverage, globally. With new innovations disrupting the financial market of the UK, the FCA also needs to continue their approach in the unsecured lending industry to protect the consumers from being exploited.
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