The sum of unsecured loans in the UK is rising continuously for over two decades. In 2017, almost £191 billion was disbursed as the personal loan; it was 31% more if compared to that in 2012. The unsecured personal loans are the debts granted on the basis of borrower’s credit score and income instead of securing the debt by anything else like property, guarantor, share documents etc. As per data available by the end of 2017, the average APR for an unsecured personal loan of £5,000 is about 8.04% and for the loan of £10,000 APR average comes down to 3.79%. The average overdraft APR was 19.72%. It means more the amount, lower is the offered APR.
The Unsecured Personal Loan Loans- Life Line of UK People:
The dependency on the unsecured personal loan varies in different regions. For example, the personal unsecured loan per person in Northampton (NN) was £753, while the figure in Salisbury (SP) dips slightly to £750. The encouraging aspect of UK’s lending industry is that the total written off personal debt has been comparatively low in a past couple of years. It means the borrowers are paying better attention to repay the debt either for credit score improvement or for demanding the next loan at cheaper APR. It is also a fact that earnings of people in each community didn’t increase according to rising in the inflation rate. The recent wages hike was also inadequate to help the people meet out living expenses with comfort. Borrowing has become a lifeline of British people – employed, unemployed, business owner or self-professional. As the demand is increasing, the average interest rate of the unsecured personal loan is coming down or it has been stable (see table below).
Inadequate Finance Support for Businesses:
The increasing numbers of business owners reaching to direct lenders in the UK show that the Govt.’ financial aid is inadequate for the businesses or the businesses don’t get the required support when they need it the most. The total of SMEs loans in Great Britain was almost the same in 2nd, 3rd, and last quarter of 2017. The Q4 of 2017, £5.6bn SMEs loan was disbursed; it was 11 % lower than the 4th quarter of 2016. The reduced volume of SME loan approval reflects downtrend in the business community to apply for a loan at Govt. agencies. The small business owners not having satisfactory credit score understand that their application will be turned down by mainstream banks; therefore, instead of wasting follow up efforts and time, they directly approach the online direct lenders committing to provide unsecured business loans. Yes, the interest rate at direct lending agencies may be a bit higher than it is at Govt. agencies but the facility, support and reliability make the direct lending a preferred choice.
The consumer credit in the UK has increased almost 19% during five years. Since 2012, the households have been failed increasingly to clear credit card and grocery store bills on the time each month. The increased interest rate on debit cards is increasing the debt per capital; sensing the trend, OBR predicted that unsecured loans level may reach 47% of monthly income by the end of 2021.
The majority of households are failing to clear their bills on the time each month. Unsecured loans have become the lifeline of British people from almost all the communities.