Table of Contents
Introduction and Abbreviations
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- Report methodology
- Report coverage and definitions
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Executive Summary
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- A less buoyant economy going forward
- Little stigma attached to debt
- The personal loans sector experiencing increased demand
- Banks dominate the personal loans market…
- …but more lenders enter the market
- Direct lending proves most popular approach
- Adspend up by almost 50%
- Half of all respondents look for the APR first
- Over 50% of loans used to buy a car
- Market outlook
Market Factors
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- Bank base rate fall arrested
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- Figure 1: Changes in the official bank base rate, January 1992-November 2003
- Consumer confidence not a casualty of war
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- Figure 2: Headline confidence and consumer expectations regarding personal finances – index movements, October 2001-October 2003
- Low unemployment promotes lending
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- Figure 3: Size of the total workforce and proportion unemployed, 1993-2007
- Spend and save?
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- Figure 4: Total PDI, consumer expenditure, savings and the savings ratio, at constant 1998 prices, 1998-2007
- Debt levels outstrip PDI
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- Figure 5: Total debt (outstanding consumer credit and lending secured on dwellings) as proporiton of total PDI, at current prices, 1998-2003
- Bankrupt and carefree
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- Figure 6: Number of individual bankruptcy orders and IVAs (England and Wales), 1991-2002
- Competition products
- Car finance deals
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- Figure 7: Consumer car finance – new business, by type of car, 1998-2002
- Credit cards
- All-in-one mortgages
- Rejecting Rule of 78?
Market Size
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- Unsecured personal loan market continues to grow
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- Figure 8: Unsecured loans as a proportion of total consumer credit, gross lending, 1998-2003
- Secured lending rising rapidly
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- Figure 9: Gross mortgage lending by type of loan, including further advances, 1998-2003
Key Players
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- Old favourites…
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- Figure 10: Major banks and building societies active in the UK personal loans market, 2003
- …and contenders
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- Figure 11: Other providers active in the UK personal loans market, 2003
- Share of consumer credit lending by main types of lender
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- Figure 12: Proportion of consumer credit gross lending accounted for by the main types of lender, 1998-2003
- Provider share of the retail current account market
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- Figure 13: Market shares of the retail current account market, November 2003
- Profiles of the main providers of personal loans
- Abbey
- Barclays
- HBOS
- HSBC
- Lloyds TSB
- The Royal Bank of Scotland
- NatWest
- Selected others
- Nationwide Building Society
- Britannia Building Society
- American Express
- Tesco Personal Finance
- npower
Products
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- Repayment rate is the critical factor
- Special deals for existing customers
- Online rewards
- Competitive approach
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- Figure 14: Standard APR and monthly repayment for an unsecured loan of £5,000, over three years, by top ten rates, November 2003
- Boosting profit margins with PPI
Distribution and the Internet
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- Direct lenders lead the way
- Pushing the Web
- Most unsecured loans agreed through current account lender
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- Figure 15: Source used to arrange last loan, by type of loan, October 2003
- The growing importance of the Internet
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- Figure 16: British Internet penetration and user profile, July 2003
- Developing online distribution methods will continue
Advertising and Promotion
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- Adspend up by 48% since 2001
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- Figure 17: Total advertising expenditure on personal loans, by category of loan product, 2001/02 versus 2002/03
- Direct mailing considered the most effective advertising channel
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- Figure 18: Total advertising expenditure on personal loans, by media type, 2001/02 versus 2002/03
- MBNA invests £19 million in advertising
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- Figure 19: Top twenty advertisers of personal loans in 2002/03
- Slapped wrists
The Consumer
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- 14% of adults have an unsecured loan, while 5% have a secured loan
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- Figure 20: Ownership of selected financial products including personal loans, October 2003
- Consumers aged 25-44 most likely to have a loan
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- Figure 21: Ownership of unsecured and secured personal loans, by gender, age and socio-economic group, October 2003
- 23% of couples living as married have an unsecured loan
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- Figure 22: Ownership of unsecured and secured personal loans, by marital status, lifestage, Special Groups and household size, October 2003
- Unsecured loans popular among full-time workers
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- Figure 23: Ownership of unsecured and secured personal loans, by working status, tenure, TV region and ACORN categories, October 2003
- 28% of respondents with a mortgage have a loan
- One in five respondents with a loan use the Internet
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- Figure 24: Ownership of unsecured and secured personal loans, by newspaper readership, new technology users, commercial TV viewing and supermarket usage, October 2003
- Desire to obtain a new car drives the loans market
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- Figure 25: Reasons for taking out a loan, ranked in order of importance, October 2003
- 59% of male respondents took out a loan for a car
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- Figure 26: Top five reasons for taking out a loan, by gender, age, socio-economic status and lifestage, October 2003
- Respondents from better neighbourhoods use loans to buy cars
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- Figure 27: Top five reasons for taking out a loan, by tenure, region and ACORN categories, October 2003
- New technology users spend loans on cars and fixing up the home
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- Figure 28: Top five reasons for taking out a loan, by newspaper readership, new technology users, commercial TV viewing and supermarket usage, October 2003
- Over 60% use a secured loan to buy a car or home improvements
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- Figure 29: Reasons for taking out secured versus unsecured loan, by current loan holders, October 2003
- Majority of unsecured loans obtained via main bank
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- Figure 30: Preferred source used to arrange personal loan, by order of popularity, October 2003
- 11% of 45-54-year-olds have a loan via their mortgage provider
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- Figure 31: Preferred source to arrange a personal loan, by gender, age, socio-economic status and lifestage, October 2003
- 13% of outright homeowners and the retired utilise specialist firms
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- Figure 32: Preferred source to arrange a personal loan, by working status, tenure, TV region and ACORN categories, October 2003
- Mortgage providers supply 11% of broadsheet readers with a loan
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- Figure 33: Preferred source to arrange a personal loan, by newspaper readership, new technology users, commercial TV viewing and supermarket usage, October 2003
- Majority of respondents considering a loan look first at the interest rate
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- Figure 34: Most influential factors affecting choice of loan provider, October 2003
- A third of unsecured loan holders want to repay their loan early without penalty
- 59% of ABs consider interest rate most important
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- Figure 35: Top five influential factors affecting choice of loan provider, by gender, age, socio-economic status and lifestage, October 2003
- Loan term important to 21% of 18-24-year-olds
- Interest rates key to 62% of respondents who read broadsheets
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- Figure 36: Top five influential factors affecting choice of loan provider, by ACORN categories, newspaper readership, commercial TV viewing and supermarket usage, October 2003
- Interest rate key among four leading loan provider options
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- Figure 37: Most influential factors affecting choice of loan provider, by preferred source to arrange loan, October 2003
- Specialist loan providers hit top gear
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- Figure 38: Main reason for taking out a loan, by preferred source to arrange loan, October 2003
- Room for further growth
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- Figure 39: Segmenting the consumer base, by past, present and prospective loan ownership, October 2003
- Current account providers the top option with prospective customers
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- Figure 40: Preferred source used to arrange personal loan – past and present loan-holders versus prospective loan-holders, October 2003
- Profiling the prospective target market
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- Figure 41: Profile of the prospective market, by gender, age, socio-economic status, lifestage and martial status, October 2003
- 16% of unemployed and renting consumers are prospective customers
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- Figure 42: Profile of the prospective market, by working status, tenure, TV region and ACORN categories, October 2003
- Prospective targets read the newspapers
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- Figure 43: Profile of the prospective market, by newspaper readership, new technology users, commercial TV viewing and supermarket usage, October 2003
- Cluster analysis
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- Figure 44: Personal loan customer cluster groups by gender, age, socio-economic group, working status and lifestage, October 2003
- Red-top readers tend to be the most loyal, while broadsheet readers are more influenced by price and flexibility
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- Figure 45: Personal loan customer cluster groups by newspaper readership, new technology users, commercial TV viewing and ACORN categories, October 2003
The Future
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- Rising interest rate hints at shape of things to come
- Consumer lack of confidence?
- Sensible response
- All-in-one and one for all
- Internet appeal
Forecast
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- Personal unsecured loans set to rise by 19% in real terms from 2003-07…
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- Figure 46: Forecast of personal unsecured loans, gross lending, 2003-07
- …while secured loans will grow by 21%
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- Figure 47: Forecast of further advances, gross lending, 2003-07
- But this represents slower growth than over the previous five years
- Unsecured loans will remain the most popular type of personal loan
- Increasing competition will put pressure on margins
- Factors incorporated
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