Table of Contents
Executive Summary
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- The market
- Personal loans advances estimated to have grown to £42 billion in 2019…
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- Figure 1: Unsecured personal loans gross advances, 2015-19*
- …and forecast to rise to £49 billion by 2024
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- Figure 2: Forecast of the value of unsecured personal loans, by gross advances, 2014-24
- Low interest rates maintain the appeal of personal loans
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- Figure 3: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, January 2015-November 2019
- Companies and brands
- LBG holds the largest personal loans book, followed by RBS Group
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- Figure 4: Value of outstanding balances for unsecured personal loans/unsecured lending, by selected providers, 2018
- Above-the-line adspend fell by 55% in 2018/19
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- Figure 5: Total above-the line, online display and direct mail advertising expenditure on unsecured personal loans and payday loans, 2014/15-2018/19
- Major banks are ahead of challengers on trust
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- Figure 6: Attitudes towards and usage of selected brands, December 2019
- The consumer
- Half of consumers have outstanding unsecured debt
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- Figure 7: Loan and credit product ownership, October 2019
- Banks, building societies and major retailers dominate the loans market
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- Figure 8: Type of loan money is owed on, October 2019
- Half of borrowers took out more than £5,000…
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- Figure 9: Amount borrowed on most recent structured unsecured loan (NETs), October 2019
- …and most prefer shorter terms
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- Figure 10: Term of most recent structured unsecured loan, October 2019
- 12% say they are likely to apply for a loan in the next year
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- Figure 11: Likelihood to apply for a new unsecured personal loan in the next 12 months, October 2019
- Most are confident that they would be accepted for a loan
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- Figure 12: Unsecured loans research behaviours, October 2019
- Trust issues could be hampering lenders
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- Figure 13: Consumer attitudes towards unsecured loans, October 2019
- What we think
Issues and Insights
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- Greater transparency is needed to boost trust in lenders
- The facts
- The implications
- Personal loans are still unacceptable for some
- The facts
- The implications
- Loan providers will welcome clarity over Brexit
- The facts
- The implications
The Market – What You Need to Know
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- Personal loans advances estimated to have grown to £42 billion in 2019…
- …and forecast to rise to £49 billion by 2024
- Low interest rates maintain the appeal of personal loans
- Credit market hit by a series of regulatory interventions
Market Size and Forecast
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- Unsecured lending growth has slowed
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- Figure 14: Gross unsecured lending, by category, January 2015-September 2019
- Personal loans lending remained flat in 2019
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- Figure 15: Other consumer credit consumer, including personal loans, 2015-19*
- Credit cards continue to grow more quickly than other consumer credit
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- Figure 16: Gross unsecured lending, 2015-19*
- Personal loans advances forecast to reach £49 billion by 2024
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- Figure 17: Forecast of the value of unsecured personal loans, by gross advances, 2014-24
- Figure 18: Forecast of the value of unsecured personal loans, by gross advances, at current and constant prices, 2014-24
- Forecast methodology
Market Drivers
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- Low interest rates maintain the appeal of personal loans
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- Figure 19: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, January 2015-November 2019
- Other unsecured lending write-offs has more than doubled since 2017
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- Figure 20: Annual write-offs of other unsecured lending to individuals, 2014-19*
- Real wages have grown consistently since the start of 2018
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- Figure 21: Annual change in wages and inflation, January 2016-September 2019
- Consumers are positive about their finances…
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- Figure 22: Mintel’s financial well-being index, January 2015-November 2019
- …and confident about the year ahead
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- Figure 23: Mintel’s financial confidence index, January 2015-November 2019
Regulatory and Legislative Changes
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- Consumer credit has been affected by a flurry of regulatory changes
- More payday lenders go to the wall
- FCA introduces new high-cost credit rules
- Arranged overdraft rates to rise as ban on higher unarranged fees comes into force
- Guarantor loans may be next on the regulator’s agenda
Companies and Brands – What You Need to Know
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- RBS Group closes the gap on LBG at the top of the loans market
- Transparency is a key focus for lenders
- Above-the-line adspend fell by 55% in 2018/19
- Major banks are ahead of challengers on trust
Market Share
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- RBS Group closes the gap on LBG at the top of the loans market
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- Figure 24: Value of outstanding balances for unsecured personal loans/unsecured lending, by selected providers, 2016-18
- Supermarket brands continue to increase their unsecure lending profiles
Competitive Strategies
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- A competitive environment
- Transparency in eligibility
- Monzo enters the loans market with a wide scope
- Marketplace banking offers a new way to find the best deal
Advertising and Marketing Activity
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- Above-the-line adspend fell by 55% in 2018/19
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- Figure 25: Total above-the line, online display and direct mail advertising expenditure on unsecured personal loans and payday loans, 2014/15-2018/19
- Sub-prime lenders continue to dominate adspend
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- Figure 26: Top 10 spenders on advertising for unsecured personal loans and payday loans, 2016/16-2018/19
- TV is by far the most popular media type
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- Figure 27: Total above-the line, online display and direct mail advertising expenditure on unsecured personal loans and payday loans, by media type, 2018/19
- Nielsen Ad Intel coverage
Brand Research
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- Brand map
- Major banks are ahead of challengers on trust
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- Figure 28: Attitudes towards and usage of selected brands, December 2019
- Key brand metrics
- Monzo wins on customer experience and recommendations
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- Figure 29: Key metrics for selected brands, December 2019
- Brand attitudes: Big banks most likely to be trusted and have good reputations
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- Figure 30: Attitudes, by brand, December 2019
- Brand personality: Monzo and Zopa are more fun but less accessible than big banks
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- Figure 31: Brand personality – macro image, December 2019
- Brand personality: Sainsbury’s is seen as an affordable and reliable alternative
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- Figure 32: Brand personality – micro image, December 2019
- Brand Analysis
- Heritage is a valuable commodity
- Monzo is seen as a progressive option, but translating this to lending is difficult
- Responses to Zopa suggest P2P lenders still have work to do
The Consumer – What You Need to Know
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- Half of consumers have outstanding unsecured debt
- Banks, building societies and major retailers dominate the loans market
- Half of borrowers took out more than £5,000 and prefer shorter terms
- 12% say they are likely to apply for a loan in the next year
- Consumers are confident that they would be accepted for a loan
- Trust issues could be hampering lenders
Loan and Credit Product Ownership
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- Half of consumers have outstanding unsecured debt…
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- Figure 33: Loan and credit product ownership, October 2019
- …rising to 69% of Millennials
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- Figure 34: Any loan and credit product ownership, by generation, October 2019
- One in 10 owes money on three or more products
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- Figure 35: Number of loan and credit products that consumers currently owe money on, October 2019
- Figure 36: Loan and credit product ownership, by number of loan and credit products that consumers currently owe money on, October 2019
Type of Loan Held
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- Half of loans are borrowed from banks, building societies and retailers
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- Figure 37: Type of loan money is owed on, October 2019
- 23% of loan customers have a high cost credit product
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- Figure 38: Type of loan money is owed on (NETs), October 2019
Loan Value and Term
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- Half of borrowers took out more than £5,000…
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- Figure 39: Amount borrowed on most recent structured unsecured loan, October 2019
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- Figure 40: Amount borrowed on most recent structured unsecured loan (NETs), October 2019
- …but a significant minority borrowed much more modest amounts
- Consumers prefer shorter repayment schedules
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- Figure 41: Term of most recent structured unsecured loan, October 2019
Future Loan Borrowing Plans
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- 12% say they are likely to apply for a loan in the next year
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- Figure 42: Likelihood to apply for a new unsecured personal loan in the next 12 months, October 2019
- Urban consumers more likely to have borrowing plans
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- Figure 43: Likelihood to apply for a new unsecured personal loan in the next 12 months, by area, October 2019
Researching and Arranging Unsecured Loans
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- Consumers are confident that they would be accepted for a loan
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- Figure 44: Unsecured loans research behaviours, October 2019
- Shopping around is only widespread before applying for loans
- Convenience appeals more to younger current and potential borrowers
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- Figure 45: Responses to the statement “Whether I’m likely to be accepted for a loan is more important to me than the interest rate”, by age and area, October 2019
- Current account providers retain a home advantage
Attitudes towards Unsecured Loans
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- Trust issues could be hampering lenders
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- Figure 46: Consumer attitudes towards unsecured loans, October 2019
- Personal loans are a last resort for many
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- Figure 47: Responses to the statement “It is more socially acceptable to use a credit card than a personal loan to make an expensive purchase”, by age, October 2019
- A third are wary of borrowing amid Brexit uncertainty
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Market forecast best/worst case outcomes
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- Figure 48: Best and worst case forecasts for the value of unsecured personal loans, by gross advances, 2019-24
- Forecast methodology
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