Table of Contents
Introduction and Abbreviations
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- Scope of the report
- Market definitions
- Other relevant reports
- Key Sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Target switchers
- Remove early redemption penalties
- Sharing customer information is good PR
- Greater price-transparency will increase competition
- Debt consolidation to grow
- Opportunities for debt management services
Executive Summary
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- Consumers cut back on spending…
- …leading to reduced demand for credit
- The size of the personal loans market
- The big five banks control the largest share
- Wide variance in loan APRs
- Increasing loan sales via direct channels
- Adspend curtailed
- Product penetration
- Key characteristics of the target audience
- Buying behaviour and consumer preferences
- Market outlook
Market Factors
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- Borrowing Behaviour and the Economic Environment
- Less appetite for borrowing in 2005
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- Figure 1: Total gross unsecured and secured lending, 2000-05
- Greater focus on saving and debt management
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- Figure 2: Total PDI, consumer expenditure, savings and the savings ratio, at 2000 prices, 1995-2010
- Are UK households over-indebted?
- Net lending as a proportion of PDI falls in 2005
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- Figure 3: Net lending as a proportion of personal disposable income (non-seasonally adjusted), at current prices, 2000-05
- Increasing individual insolvencies: a cause for concern?
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- Figure 4: Number of individual bankruptcy orders and IVAs (England and Wales), 1998-2004
- The young are particularly vulnerable
- Debt crisis: a change in circumstances is often the catalyst
- Unemployment set to increase slightly
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- Figure 5: Size of the total workforce and the proportions unemployed and self-employmed, 2000-10
- Loan payment protection insurance under fire
- Consumer Motivations
- To buy a car is the top reason for a loan
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- Figure 6: Main reasons for arranging (most recent) loan, October 2005
- Regulatory developments
- The 2003 White Paper recommendations
- New early redemption penalty laws implemented
- The Consumer Credit Bill introduced to Parliament
- European Directive on Consumer Credit: still at the consultation stage
Market Size and Trends
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- People are three times as likely to have an unsecured as a secured personal loan
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- Figure 7: Ownership of loan products, by type, 2004 and 2005
- A note about student and graduate loans
- Gross lending on unsecured personal loans dips slightly in 2005
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- Figure 8: Consumer credit gross lending, by product category, 2001-05
- Secured personal loans experience significant fall in 2005
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- Figure 9: Other secured lending as a proportion of gross secured lending (approvals), 2001-05
- The size of the personal loans market
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- Figure 10: Gross lending on unsecured and secured personal loans, 2001-05
Key Players and the Competitive Environment
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- A diverse marketplace
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- Figure 11: Approximate composition of the unsecured and secured personal lending markets, 2005
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- Figure 12: Top six major British banking groups and their (selected) subsidiaries, 2005
- The largest loan providers
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- Figure 13: Company obtained personal loan from, by loan type, October 2005
- Lloyds TSB is number one in the unsecured loan market...
- Alliance & Leicester and Northern Rock punch above their weight
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- Figure 14: Top nine unsecured personal loan providers, by proportion of current account and loan customers, 2005
- ...while HBOS is way out in front in the secured sector
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- Figure 15: Top five secured personal loan providers, by proportion of loan customers and share of gross mortgage lending, 2004 and 2005
- New entrants still emerging
- Product differentiation
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- Figure 16: Repayment terms for selected unsecured loans of £3,000 over 36 months, by APR, October 2005
- The gap between advertised and actual rates
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- Figure 17: Advertised personal loan rate and actual mean rates paid, February 2005-June 2005
- Flexible features
- Industry innovation: the two-in-one card
Distribution and the Internet
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- Direct channels are gaining distribution share
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- Figure 18: Channel used to arrange (most recent) loan, by type of loan and borrower. September 2004
- Around three in five adults use the Internet
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- Figure 19: British Internet penetration and profile of users versus total population profile, by gender, age, socio-economic group and working status, August 2005
- A niche but steadily growing market for online loan sales
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- Figure 20: Websites browsed and purchased from, by type of financial product, 2002-05
Advertising and Promotion
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- Adspend on personal loans down in 2005
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- Figure 21: Total advertising expenditure on personal loans, by product type, 2001-05
- Direct mail accounts for over half of total adspend
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- Figure 22: Total advertising expenditure on personal loans, by media type, 2000/01-2004/05
- Direct operators and brokers tend to invest the most
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- Figure 23: Top 20 advertisers of personal loans, 2004 and 2005
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Confidence at a low ebb
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- Figure 24: The five measures comprising the consumer confidence index, Q3 2003-Q3 2005
- Increasing uncertainty suppresses borrowing intentions
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- Figure 25: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2004-September 2005
- Younger and less affluent consumers are set to be more active
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- Figure 26: Expected financial activity, by socio-demographic and income groups, September 2005 and average for the last 15 quarters
- Debt repayment is high on the agenda
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- Figure 27: Leading financial activities planned in the next six months, September 2004-September 2005
- The property market begins to look more promising
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- Figure 28: Intended mortgage and property purchase activity, September 2003-September 2005
- Little year-on-year change in main provider shares
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- Figure 29: Leading main financial services providers: market shares, September 2004-September 2005
- RBS should benefit from increased loans business
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- Figure 30: Saving, investment and lending market sizes, by expected customer demand and brand leaders, September 2005
- The Scottish banks will have the most active customer base
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- Figure 31: Activity levels of MFSPs’ customer bases, September 2005
- Lloyds TSB and HSBC have both high proportions of intended borrowers and debt repayers
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- Figure 32: Activity intentions and current household financial situation, by MFSP, September 2005
The Consumer and Product Ownership
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- Credit cards and bank overdrafts are the most popular sources of credit
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- Figure 33: Proportion of adults owing money on lending products, by order of signficance, October 2005
- 25-34-year-olds are twice as likely as the population average to have an unsecured loan
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- Figure 34: Proportion of adults owing money on lending products, by gender, age, socio-economic group and working status, October 2005
- 70% of cohabiting couples have non-mortgage debts
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- Figure 35: Proportion of adults owing money on lending products, by marital status, lifestage and Mintel’s Special Groups, October 2005
- One in 14 mortgage holders have a secured loan
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- Figure 36: Proportion of adults owing money on lending products, by tenure, car ownership, gross annual household income, region and ACORN category, October 2005
- TV offers a good way of reaching potential targets
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- Figure 37: Proportion of adults owing money on lending products, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, October 2005
- Unsecured loan holders have a younger age profile
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- Figure 38: Profile of loan holders, by type, by gender, age, socio-economic group, Mintel’s Special groups and tenure, October 2005
- Most borrowers seek the security of one of the big five banks
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- Figure 39: Type of company obtained loan from, by loan type, October 2005
- Half of ‘non-high street bank’ loan customers are under 35
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- Figure 40: Profile of the customer bases of high street banks and other loan providers, by gender, age and socio-economic group, October 2005
- Secured loan holders are more likely to have shopped around
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- Figure 41: Proportion of loan holders who agree with statements concerning the buying process, by loan type, October 2005
- Lack of APR awareness
- Men and the middle-aged more likely to shop around
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- Figure 42: Proportion of loan holders who agree with statements concerning the buying process, by gender and age, October 2005
- Internet users are more likely to decline PPI
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- Figure 43: Proportion of loan holders who agree with statements concerning the buying process, by socio-economic group, mortgage holders and Internet users, October 2005
- Customers of the big five banks are least likely to shop around...
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- Figure 44: Company obtained loan from, by those who were already a customer and those who shopped around, October 2005
- ...and least likely to use direct distribution channels
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- Figure 45: Proportion of loan holders who agree with statements concerning the buying process, by where account held, October 2005
- Further analysis
Consumer Attitudes and Targeting Opportunities
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- CHAID analysis
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- Figure 46: Target groups identified for personal lending market, October 2005
- A tenth of unsecured personal loan holders also have a secured loan
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- Figure 47: Proportion of adults owing money on lending products, by lending product, October 2005
- Just over one in 12 adults owe money on three or more types of credit
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- Figure 48: Number of lending product types owned, October 2005
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- Figure 49: Proportion of adults owing money on lending products, by number of types owned, October 2005
- Wealthier sections of society are more likely to have multiple debts
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- Figure 50: Number of lending product types owned, by gender, age, socio-economic group, working status, tenure and household income, October 2005
- Secured loan holders much more likely to have savings and investments
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- Figure 51: Ownership of savings and investment products, by total sample, all borrowers and loan holders, October 2005
- Debts versus savings
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- Figure 52: Population segmentation, according to possession of debts and savings, October 2005
- Older consumers more likely to have savings than debts
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- Figure 53: Population segmentation, according to possession of debts and savings, by gender, age, socio-economic group, working status, tenure and household income, October 2005
- C2s and 25-34-year-olds tend to be in the most vulnerable positions
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- Figure 54: Profile of four consumer groups, based on ownership of debts and savings, by gender, age, socio-economic group, working status, tenure and household income, October 2005
- One in 20 adults owe more than £10,000 in non-mortgage debts
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- Figure 55: Amount of debt outstanding (excluding mortage debt), by total sample and loan holders, October 2005
- The most indebted favour credit cards and unsecured loans
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- Figure 56: Proportion of adults owing money on lending products, by type and amount of non-mortgage debt, October 2005
- The more products held, the greater the debt
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- Figure 57: Amount of debt outstanding (excluding mortage debt), by number of lending products held, October 2005
- The wealthier sections of society tend to have the highest debts
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- Figure 58: Amount of debt outstanding (excluding mortage debt), by gender, age, socio-economic group, working status, tenure and household income, October 2005
- One in four adults say they are unlikely to ever need a loan
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- Figure 59: Agreement with statements relating to debt and credit, by total sample and loan holders, October 2005
- Loan holders are generally confident of managing their debt
- One in five secured loan holders later regretted taking out their loan
- Cluster analysis
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- Figure 60: Personal lending clusters, October 2005
- Repentant Borrowers represent the key target market for debt consolidation...
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- Figure 61: Agreement with statements, by personal lending clusters, October 2005
- ...as 44% of them are making use of at least two lending products
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- Figure 62: Proportion of adults using lending products, by personal lending clusters, October 2005
- Credit-Averse consumers are least indebted
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- Figure 63: Amount of debt outstanding (excluding mortage debt), by personal lending clusters, October 2005
- Three in four Repentant Borrowers are aged under 45
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- Figure 64: Profile of the personal lending clusters, by gender, age, socio-economic group, working status, tenure and household income, October 2005
Industry Views
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- Providers reinforce bad debt provisions...
- ...but better data sharing is needed
- Extending the summary box idea to personal loans
The Future
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- Weakened consumer confidence
- A ray of light in the housing market?
- Implications for the unsecured lending market
- Demand for debt consolidation to grow
- More stringent lending criteria...
- ...and greater data sharing
- Consumer credit industry awaits new Act
- Providers may shift strategy
Forecast
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- Steady as she goes
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- Figure 65: Forecast of gross lending on unsecured and secured personal loans, at current and constant prices, 2005-10
- Factors incorporated
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