“Consumers want to take control of their borrowing from the application process to the repayment of the loan. Loan providers will face a challenge to meet this demand for flexibility while still supporting those needing a more structured approach.”
– Richard Shepherd, Research Analyst – Financial Services
Some questions answered in this report include:
- Who is going to fill the gap for less creditworthy consumers?
- Are consumers favouring online loan applications compared to loans arranged face to face?
- Who are the most likely purchasers of future loans?
- Do consumers want to take more control of their loan borrowing?
Personal loan lending recorded strong growth in 2013 as the UK economic recovery gathered pace. Mintel estimates that gross advances increased by 12% over the year. Higher levels of employment and improvements in consumer confidence have helped to boost the appetite for lending, while low interest rates and the Bank of England’s Funding for Lending scheme helped lenders to offer consumers some of the cheapest loans in a decade.
The market has, however, undergone some changes in the last 12 months. The growth of niche lending sectors, primarily in loans for those with poor credit history, has seen a number of new competitors. In the mainstream market supermarket banks and challenger brands have made strides to reel in the dominance of the leading current account providers.
Alternative lenders have led the way in innovations, but consumer demand is driving traditional lenders to catch up, particularly in digital media. Mintel’s research has found that consumers are looking for more control over their loan borrowing, prompting development in web services.
This report examines the personal loans market, including discussion of recent changes in the industry. The size of the market is analysed and a five-year forecast for the value of new advances is provided. The sector’s major players are examined, along with notable product developments. Mintel’s specially commissioned consumer research provides insight into loan ownership, the reasons for taking loans and the methods of researching and arranging loans. The likelihood of taking out a loan in the next 12 months is considered, as well as the appetite for different loan product features.
This report looks at the unsecured personal loan market. In contrast to secured loans, which are typically secured against the borrower’s property, unsecured personal loans are borrowed without any collateral being put up by the borrower. Personal loans are, in the main, available to borrow for between £1,000 and £25,000 (subject to credit checks) over fixed repayment terms of one to 10 years.
The report will mostly focus on traditional personal loans. Traditional personal loans are offered by banks, building societies, credit card providers and some retailers. However, the market is now also home to alternative loan product providers such as payday lenders and peer-to-peer lenders. These products are not considered in detail but the report investigates whether there are lessons for traditional lenders to take from the recent success of these types of lenders.