The financial collapse of 2008 saw the UK’s bank-lending system suffer a catastrophic demise, manifesting with the vast majority of consumer lending cut off at source. The era of austerity had well and truly been awakened for the British public, and ten years on, the Autumn Budget rhetoric leads us to believe the dark days are finally drawing to an end.
However, according to a national study by loan comparison site FairMoney, the situation has evolved, but is still riddled with sluggish lending and cowboy tactics – perpetuating a situation deemed no more of an improvement than that of a decade ago.
At its peak, the payday market was worth £2.5b in 2013. Testament to its maligned reputation, now, it is only worth £220m. That said, many are still at the mercy of extortionate interest rates, and loose due diligence. It seems the nation of hard-workers and grafters Hammond dedicated last month’s financial statement to, are the exact demographics left out in the cold.
FairMoney’s research has shown that over four in 10 (43%) of people with loans only borrow an average amount of up to £500, with 41% paying an interest rate in excess of 25%. A quarter (24%) of Brits only borrow up to £10000, while 5% borrow as little as £100. A staggering two-thirds (62%) of those who have been refused a loan one to three times have borrowed from a payday loan provider.
However, the place of short-term finance and the UK’s credit ecosystem is not to be discredited. The study commissioned across 2003 respondents reveals a staggering 8.5 million (17%) people have been saved from a financial situation that the bank has refused to lend on by a payday lender. They stated that if this option wasn’t available to them, they would have defaulted and fallen into a repossession procedure.
The study assembled the following key stats:
- 9 million people feel abandoned by the Bank’s lending system
- 13 million – 24% – Brits borrow an average loan amount of £1000 or less. 5% of Brits borrow an average amount of less than £100
- 41% of respondents who have a loan pay the highest rate of interest of over 25%
- 43% of those who have loans have an average loan value of up to £500
- 62% of those who have taken out a loan from a payday loan company have been refused a loan between 1-3 times
- 8.5 million people have been saved by a payday loan from a financial situation that the bank has refused to lend on
Some interesting national statistics reveal the following:
- The average loan size is £3104.50 in the UK
- 28% of Brits have taken a loan out for a vehicle – this equates to 9 million people
- 5 million people have taken out a loan for home repairs and improvements
- 13% of people (4 million) have taken out a loan for consolidating debts.
- 3.5 million (11%) people have taken out a loan for house repayments
- One in 10 – 3.4 million – have taken out a loan for emergency cash
- Two thirds (66%) of those who have taken out a credit card have also taken out a payday loan
- Of those who have taken out a loan from a payday loan company, 60% have been refused a loan four or more times before
- 10% of Social grade ABC1s have taken out a loan from a payday loan company
- 56% of those who feel that payday loans have saved them from a financial situation that the bank has refused to lend on have been refused a loan between 1-3 times This increases to 63% of those who have been refused a loan four or more times
- A third (33%) of respondents who pay an interest rate of 25% or above borrow an average amount of between £1-500
The study also revealed interesting data about millennials
- 18-34s borrow more than any other generation. The average loan value for 18-34s is £4084. For 35-54s its £3792 and for over 55s its £1769
- The average loan amount for Millennials (£4084) is over a sixth of their average annual salary, which stands at £23995
- Nearly a fifth (19%) of 18-34s have taken out a loan from a payday loan company. This is versus just 8% of 35-54s and 3% of over 55s
- Nearly a quarter (23%) of 18-34s feel abandoned by the UK’s bank lending system. This is versus 19% of 35-54s and 11% of over 55s
Finally the research highlighted some regional breakdown stats
- The North East borrows the least at £1053. The West Midlands borrows the most at £4618
- 16% of adult living in the East Midlands have taken out a payday loan, versus just 4% in the South East
- People living in Northern Ireland are the most likely to have a credit card, with two-thirds (66%) owning one. Those in the West Midlands are the least likely to have one, with just under half (49%) said to have own a credit card
- Over a fifth (21%) of those in the East Midlands pay an interest rate of 25% or more.
Launch of the Fair Finance Community
The disparaging national study has inspired FairMoney to launch the Campaign for FairFinance, manifesting as the Fair Finance Community (FFC). The initiative is the first of its kind to inspire long-lasting change for the nation’s much-needed short-term finance system. The aim of the FFC is to galvanise those to support fair finance for all, by lobbying for fairness across the financial industry, and also to claim a stake in the region’s short-term finance revolution.
The aim of the FFC is galvanise those across the regions to support fair finance for all and lobby for fairness across the financial industry. This is supported by the Campaign for Fair Finance, who have recently been featured in Forbes and on TalkRadio, and have interviewed notable individuals such as Jacob Rees-Mogg and Archbishop of Canterbury Justin Welby to promote the FFC. Investors and potential Non-Executive Directors have the opportunity to join the Fair Finance Community, and are encouraged to enquire about the FFC by contacting Roger personally directly at Roger.Gewolb@Fairmoney.com.
Founder Dinis Guarda
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