Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Insights and Opportunities
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- Loans with a variable monthly repayment
- Rewarding for customers with a good repayment history
- Linked consumer credit products
- Responsible lending and consumer education
Market in Brief
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- The size of the personal loans market and other forms of borrowing
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- Figure 1: Estimated lending on unsecured personal loans, 2001-07
- The big high street banks dominate the market
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- Figure 2: Personal loan market share by provider type, August 2007
- Adspend in decline
- High levels of consumer debt
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- Figure 3: Number of individual bankruptcy orders and IVAs in England and Wales (not seasonally adjusted), Q1 2004-Q2 2007
- The potential loss of income from PPI
- The impact of the ‘credit crunch’
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- Figure 4: Loan acceptance rates, Apr 2007-Oct 2007
- Weaker consumer appetite for debt
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- Figure 5: Debt repayment, borrowing and net debt repayment, Sep 2002-Sep 2007
- Some interesting trends exist regarding product ownership…
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- Figure 6: Consumer credit ownership, by lifestage, August 2007
- … as well as consumer attitudes towards debt
Fast Forward Trends
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- Trend 1: Over-optioned consumers
- Trend 2: The return of the philanthropic feel-good factor
Internal Market Environment
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- Key points
- Debt problems are still a major concern…
- …making them a high-profile subject in the media
- Consumer bodies report growing problems…
- …although insolvency figures dipped in 2007
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- Figure 7: Number of individual bankruptcy orders and IVAs in England and Wales (not seasonally adjusted), Q1 2004-Q2 2007
- Changing legislation for those with debt problems
- Debt management companies have a large part to play
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- Figure 8: Advertising expenditure for debt management services, H1 200-H1 2007
- The government is taking action
- PPI under increasing scrutiny
- CAB, OFT and FSA investigating the market
Broader Market Environment
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- Key Points
- Rising interest rates are likely to inflate loan rates
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- Figure 9: Bank of England base rate, 1997-2007
- The population of people employed in the UK is rising
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- Figure 10: Size of total workforce and proportions employed, self-employed and unemployed, 2002-12
- High disposable income and consumer spending fuels borrowing
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- Figure 11: PDI, consumer expenditure, savings and savings ratio (at current prices), 2002-12
- A booming economy merely stoked the fire
- And what about the impact of the global credit crunch?
- Loan acceptance rates fall
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- Figure 12: Loan acceptance rates, Apr 2007-Oct 2007
- Some lenders are leaving the market
Consumer Financial Activity
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- Key Points
- Background
- Consumer confidence at a major low point
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- Figure 13: Rolling monthly, 3-monthly and yearly UK consumer confidence indices, Jan 2000-Sep 2007
- Employment prospects look favourable
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- Figure 14: Unemployment expectations and job availability, Jan 2006-Sep 2007
- Changing consumer intentions towards spending and saving
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- Figure 15: Intentions to save and spend in the next 12 months*, Jan 2001-Sep 2007
- Consumers are generally becoming less financially active…
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- Figure 16: Expected consumer activity in savings and investments, borrowing, and debt repayment, Mar 2006-Sep 2007
- … with debt repayment showing a significant decline since mid-2004
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- Figure 17: Debt repayment, borrowing and net debt repayment, Sep 2002-Sep 2007
- Intended consumer credit activity has dropped significantly
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- Figure 18: Intended consumer credit activities, Q3/Q4 2002-Q3/Q4 2007
- The younger generation and low-income groups are less inclined to pay off existing debts
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- Figure 19: Debt repayment intentions, by age and socio-economic groups, 2005-07
Competitive Context
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- Key Points
- Credit cards
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- Figure 20: Credit cards: number of cards in issue, total and average annual transaction volumes and value, 2000-06
- Overdrafts
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- Figure 21: Overdraft advances to individuals and individual trusts (MBBG only), 2001-06
- Housing equity withdrawal
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- Figure 22: Housing equity withdrawal and housing equity withdrawl as a proportion of post-tax income (seasonally adjusted), Q1 2002-Q2 2007
Strengths and Weaknesses in the Market
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- Strengths in the market
- An open market with high consumer choice
- Data sharing means better risk profiling
- High cross-selling potential
- More responsible consumers
- Weaknesses in the market
- High level of bad debts
- Weaker consumer appetite for borrowing
- Possible loss of income from PPI
- Banks tightening their lending criteria
- The sustainability of price-based competition
Who’s Innovating?
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- Key Points
- Is there scope for innovation in the personal loans market?
- Cashback… that old chestnut!
- Moneyback Bank
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- Figure 23: Annual moneyback payment, according to loan size
- Barclays
- Loan top-ups becoming commonplace
- Switching incentives extended to personal loans
- …and then there are price matching guarantees
- Speed is of the essence…
- The importance of convenience and flexibility
- Zopa – a different concept altogether
Trade Perspective
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- Pricing in the marketplace
- The role of branding
- Possible outcome of the PPI investigation
- Cross-selling difficulties?
- The aggregators’ influence
- The impact of high levels of consumer debt…
- … and the global credit crunch
- What about the future?
Market Size and Forecast
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- Key Points
- An estimated 5 million adults in the UK have a personal loan
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- Figure 24: Consumer credit ownership, August 2007
- At the highest level, total gross unsecured lending is down
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- Figure 25: Total gross unsecured consumer lending, 2000-07
- At product level, the demand for personal loans has fallen…
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- Figure 26: Total gross unsecured consumer lending split by product category, 2001-07
- … with three years of decline
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- Figure 27: Estimated lending on unsecured personal loans, 2001-07
- What does the future look like for personal loans?
- Market forecast for unsecured personal loans
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- Figure 28: Forecast of total gross unsecured consumer lending split by product category, 2002-12 based on current prices
- Factors used in this forecast
Market Share
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- Key Points
- Lloyds TSB still has the dominant share of the personal loans market
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- Figure 29: Personal loan market share by company, August 2007
- The top 5 banks still dominate the market
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- Figure 30: Personal loan market share by provider type, August 2007
Companies and Products
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- Key Points
- To offset a weaker brand image, smaller providers tend to offer more competitive rates
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- Figure 31: Repayment terms for selected unsecured personal loans of £5,000 over 3 years, sorted by APR, September 2007
- Personal pricing blurs comparisons
- A diversity of players operate in this market
- The big banks have a number of subsidiary brands
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- Figure 32: Top five MBBG companies and selected subsidiaries that offer undecured personal loans, 2007
- Historic market prosperity has attracted (fairly) new entrants
Brand Elements
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- Brand map
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- Figure 33: Attitudes and usage of personal loan brands, October 2007
- Lloyds TSB
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 34: Attitudes towards Lloyds TSB, October 2007
- Lombard Direct
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 35: Attitudes towards Lombard Direct, October 2007
- Smile.co.uk
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 36: Attitudes towards Smile.co.uk, October 2007
- Post Office
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 37: Attitudes towards Post Office, October 2007
- Ocean Finance
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 38: Attitudes towards Ocean Finance, October 2007
- Freedom Finance
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 39: Attitudes towards Freedom Finance, October 2007
- Norton Finance
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 40: Attitudes towards Norton Finance, October 2007
- Yes Loans
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 41: Attitudes towards Yes Loans, October 2007
- The AA
- Brand background
- What the brand is trying to achieve
- What consumers think?
- Performance indicators:
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- Figure 42: Attitudes towards the AA, October 2007
Brand Communication and Promotion
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- Key Points
- Personal loans is the third-largest advertising sector in financial services
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- Figure 43: Advertising expenditure on different financial services products, 2003/04-2006/07
- Adspend on secured personal loans has overtaken expenditure on unsecured loans for the first time
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- Figure 44: Advertising expenditure on different types of personal loan, 2003/04-2006/07
- Share of voice differs between secured and unsecured lenders
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- Figure 45: Top ten advertisers of secured and unsecured personal loans, 2003/04-2006/07
- Unsecured loan providers use direct mail to attract customers whilst secured loan providers advertise on television
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- Figure 46: Advertising expenditure on secured and unsecured personal loans by media type, Jul 2006-Jun 2007
Channels to Market
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- Key Points
- The Internet has proven to be a powerful consumer research tool as well as an increasingly popular channel of arrangement
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- Figure 47: Websites browsed for information purposes with a view to possibly buying and actually purchased from in the last three months (financial products only), Nov 2002-Jul 2007
- Growing use of direct channels to arrange a loan
- Different channels adopt a different pricing strategy
- Aggregators are a highly influential force in the market…
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- Figure 48: Advertising expenditure of a selection of major financial price comparison websites, 2003/04-2006/07
- … but the industry has been criticised recently over its ‘impartiality’
The Consumer: Product Ownership
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- Key Points
- About Mintel’s consumer research
- Credit cards still the most popular consumer credit product
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- Figure 49: Consumer credit ownership, August 2007
- Men are the credit kings
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- Figure 50: Consumer credit ownership, by gender, August 2007
- Live hard, die young… and keep on borrowing
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- Figure 51: Consumer credit ownership, August 2007
- Insights and opportunities
- Families with affordability issues?
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- Figure 52: Consumer credit ownership, by lifestage, August 2007
- Middle income groups looking for lifestyle enrichment
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- Figure 53: Consumer credit ownership, August 2007
- Major high street banks still dominate the market
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- Figure 54: Personal loan* market share by type of lender, August 2007
- Shifting loan patterns?
The Consumer: Attitudes towards Debt
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- Key Points
- A more cautious outlook towards spending…
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- Figure 55: Attitudes towards borrowing and saving, August 2007
- … with little difference between affluence or gender...
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- Figure 56: Attitudes towards borrowing/saving, by gender and socio-economic group, August 2007
- … but a considerable difference in the attitude of older people
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- Figure 57: Attitudes towards borrowing and saving by age group, August 2007
- And some additional trends
- Current account providers are in a strong position…
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- Figure 58: Loan arrangement through current account provider, August 2007
- … especially when it comes to younger customers
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- Figure 59: Loan arrangement through current account provider, by age, August 2007
- Middle-income earners are also likely to turn to their bank for a loan
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- Figure 60: Loan arrangement through current account provider, by gross annual household income and newspaper readership, August 2007
- Consumers in-the-know about payment protection insurance
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- Figure 61: Consumer awareness of payment protection insurance mis-selling allegations, August 2007
- Women less informed… so too are the young and the elderly
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- Figure 62: Consumer awareness of payment protection insurance mis-selling allegations by gender and age, August 2007
- The link between age and affluence
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- Figure 63: Consumer awareness of payment protection insurance mis-selling allegations, by combined age and socio-economic group splits, August 2007
The Consumer: Targeting Opportunities
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- Key Points
- Consumer attitudes towards debt
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- Figure 64: Consumer attitudes towards debt and consumer credit products, August 2007
- Few feel they are in serious financial difficulty
- Women and older people are ‘loan averse’
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- Figure 65: Likelihood of needing a loan, by age and gender, August 2007
- Demographics of those in the potential market for a loan
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- Figure 66: Profile of people who are in the potential market for a loan, by age, gender, socio-economic group and gross annual household income, August 2007
- Families are hot prospects
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- Figure 67: Lifestage of people who are in the potential market for a loan, August 2007
- Consumers in the ‘potential market’ for a loan are especially price-sensitive
- Which consumers are the most price-sensitive?
- Who are most comfortable with their credit-related obligations?
- Payment protection – who’s interested?
- The highly segmented role of aggregators
- Defining the struggling borrowers and non-savers
- Refusal of consumer credit is not confined to a specific segment
- Wealthy families are more likely to respond to direct mail
- The in-market crowd – young, single and not doing badly
- Cross-selling opportunities may exist for credit card owners and those with a specialist car loan/finance plan
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- Figure 68: Cross-holdings of different types of consumer credit products (with an outstanding balance), August 2007
- Almost two in ten consumers have multiple types of outstanding consumer credit
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- Figure 69: Consumer groupings based of the number of different types of credit held (with an outstanding balance), August 2007
- Consumers with multiple forms of consumer credit, are likely to owe money on credit cards, unsecured loans and overdrafts
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- Figure 70: Consumer groupings based of the number of different types of credit held, by type of consumer credit holding, August 2007
- More indebted consumers tend to be more rate-sensitive and more accustomed to using price comparison sites
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- Figure 71: Consumer groupings based of the number of different types of credit held, by attitudes towards debt and personal loans, August 2007
- Those that have just ‘started out’ on their mature life phase are more likely to have multiple types of outstanding credit
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- Figure 72: Demographic analysis of consumers based of the number of different types of consumer credit held, August 2007
- Consumer typologies – background and definitions
- Background
- Definitions
- Mintel estimates that 12 million people in the UK could be described as ‘struggling borrowers’
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- Figure 73: Consumer typologies based on consumer credit ownership and attitudes towards borrowing and personal loans, August 2007
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- Figure 74: Average number of consumer credit products held (with an outstanding balance) by consumer typology, August 2007
- Confident borrowers are more likely to refuse PPI and use price comparison sites
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- Figure 75: Attitudes and beliefs of customers, by consumer typology, August 2007
- Confident borrowers have a higher tendency towards multiple consumer credit ownership
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- Figure 76: Ownership of multiple types of credit, by consumer typology, August 2007
- Summary of attitudes and demographics of the four consumer groups
- Attitudes and beliefs of ‘confident borrowers’
- Demographic profile of ‘confident borrowers’
- Attitudes and beliefs of ‘struggling borrowers’
- Demographic profile of ‘struggling borrowers’
- Attitudes and beliefs of those ‘potentially interested in a loan’
- Demographic profile of those ‘potentially interested in a loan’
- Attitudes and beliefs of those ‘not interested in a loan’
- Demographic profile of those ‘not interested in a loan’
Appendix
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- Product ownership
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- Figure 77: Consumer credit ownership, by demographic characteristics, August 2007
- Attitudes towards borrowing and saving
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- Figure 78: Attitudes towards borrowing and saving, by demographic characteristics, August 2007
- Channel of loan arrangement
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- Figure 79: Loan arrangement through current account provider, by demographic characteristics, August 2007
- Awareness of PPI mis-selling
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- Figure 80: Awareness of PPI mis-selling allegations, by demographic characteristics, August 2007
- Attitudes towards loans and borrowing in general
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- Figure 81: Consumer attitudes towards loans and borrowing in general, by demographic characteristics, August 2007, (part 1 of 2)
- Figure 82: Consumer attitudes towards loans and borrowing in general, by demographic characteristics, August 2007, (part 2 of 2)
- Consumers potentially in the market for a loan
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- Figure 83: Consumers who are in the potential market for a loan, by demographic characteristics, August 2007
- Figure 84: Attitudes of consumers who are in the potential market for a loan, August 2007
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- Figure 85: Attitudes of consumers who are in the potential market for a loan, by demographic characteristics, August 2007, (part 1 of 2)
- Figure 86: Attitudes of consumers who are in the potential market for a loan, by demographic characteristics, August 2007, (part 2 of 2)
- Consumer typologies
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- Figure 87: Consumer typologies based on consumer credit ownership and attitudes towards borrowing and personal loans, by demographic characteristics, August 2007
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