2021
9
UK Unsecured Loans Market Report 2021
2021-02-13T03:01:12+00:00
OX1042293
2195
134329
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Report
en_GB
“COVID-19 has had a profound impact on the unsecured loans market. Lending has been slashed as opportunities for consumers to make major purchases requiring credit have been severely reduced due…

UK Unsecured Loans Market Report 2021

£ 2,195 (Excl.Tax)

Report Summary

Providing the most comprehensive and up-to-date information and analysis of the UK Unsecured Loans market, including the behaviours, preferences and habits of the consumer.

With the COVID-19 lockdowns shutting most non-essential businesses, the unsecured loans market saw a major decline in demand. With people’s non-essential spending extremely limited, consumer credit lending fell by 49%, with non-credit card unsecured lending falling by 72%.

Big-ticket item purchasing is usually a major driver for unsecured loans, but with the lockdowns and the economic uncertainty limiting spending power, there was a 19% estimated drop in gross lending in 2020.

22% of consumers say that the ability to extend of increase their loan is the most important factor when looking for a loan, while 21% say they want the option of taking payment holidays. This demand for flexibility is mirrored by the growing demand for flexibility in other customer-facing markets.

While savings people have made over the pandemic could see a delayed recovery for the market thanks to a continued drop in demand, in the longer term an increased demand will fuel market purchases. Brands could improve their reputation and customer trust through implementing payment holidays and continuing to support them as government support is slowly rolled back.

This report covers the current state of the UK unsecured loans sector, how the pandemic has affected the market and what steps brands could take to improve market recovery.

Read on to discover more details or take a look at all of our UK Financial Services market research.

Quickly understand

  • The impact of COVID-19 on the unsecured loans market.
  • The size of the unsecured loans market and major players.
  • Ownership of unsecured loan products and the cost of repayments.
  • Reasons for taking out a loan and consumer plans to borrow in the next 12 months.
  • Important features that consumers look for in a new loan.
  • Attitudes towards loans, including trust in lenders to lend responsibly.

Covered in this report

Lenders: NatWest Group, Lloyds Banking Group, HSBC, Barclays, Nationwide, Santander, Virgin Money, Tesco Bank, Sainsbury’s Bank, TSB, Loans Warehouse, Amigo Loans, Provident, Oakam, Metro Bank, Zopa, Cahoot, Vive.

Expert analysis from a specialist in the field

Written by Rich Shepherd, a leading analyst in the Financial Services sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

COVID-19 has had a profound impact on the unsecured loans market. Lending has been slashed as opportunities for consumers to make major purchases requiring credit have been severely reduced due to lockdowns and other covid restrictions. However, the outbreak has also given lenders a chance to improve perceptions by supporting consumers through this difficult time. The prospects for recovery in lending after the pandemic are good so long as low rates continue to make loans a cheap and appealing form of credit.

Rich Shepherd
Associate Director – Financial Services

Table of Contents

  1. Overview

      • Key issues covered in this Report
        • Impact of the January lockdown and the vaccination rollout
          • Economic and other assumptions
            • Products covered in this Report
            • Executive Summary

                • Impact of COVID-19 on unsecured loans
                  • Figure 1: Short-, medium- and long-term impact of COVID-19 on unsecured loans, January 2021
                • The market
                  • Market size and forecast
                    • Figure 2: Market size and forecast for unsecured loans, 2015-25 (prepared in January 2021)
                  • Unsecured lending crashed in April 2020
                    • Figure 3: Gross unsecured lending, by category, January 2016-November 2020
                  • Payment holidays have been key to regulatory response to COVID-19
                    • Companies and brands
                      • NatWest Group had the biggest loan book in 2019, but has been hurt by COVID-19
                        • Figure 4: Value of outstanding balances for unsecured personal loans/unsecured lending, by selected providers, 2019
                      • Adspend fell by 77% in the year to the end of November
                        • Figure 5: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, 2015/16-2019/20
                      • The consumer
                        • Credit ownership has remained broadly stable over the last year
                          • Figure 6: Loan and credit product ownership, November 2020
                        • Most loans come from traditional lenders
                          • Figure 7: Type of loan money is owed on, November 2020
                        • Loan repayments represent significant expenses for most borrowers
                          • Figure 8: Monthly value of repayments to most recent structured personal loan, November 2020
                        • The impact of COVID-19 on other markets has harmed loan prospects
                          • Figure 9: Reasons for taking out most recent structured personal loan, November 2020
                        • One in seven likely to apply for a loan in the next 12 months
                          • Figure 10: Likelihood to apply for a new unsecured personal loan in the next 12 months, November 2020
                        • Low rates are essential, trust is key, and flexibility can help lenders stand out
                          • Figure 11: Important factors when choosing a new loan, November 2020
                        • COVID-19 has raised concerns, and saving is still preferred over borrowing
                          • Figure 12: Attitudes towards unsecured loans, November 2020
                      • Issues and Insights

                        • COVID-19 has cut demand for borrowing and confidence in long-term commitments…
                          • …but offers a chance to enhance perceptions and build trust
                            • Flexible solutions will appeal, but not if they come with added cost
                            • The Market – Key Takeaways

                              • Lending fell by a fifth as COVID-19 hit the unsecured loans market…
                                • …but low rates and pent-up demand will help the market bounce back
                                  • The pandemic has offered a chance to pay down debts and build up savings
                                    • Payment holidays have been key to regulatory response to COVID-19
                                    • Market Size and Forecast

                                      • Lockdowns have significantly reduced the demand for loans to fuel spending
                                        • Figure 13: Short-, medium- and long-term impact of COVID-19 on unsecured loans, January 2021
                                      • A significant drop in lending
                                        • Figure 14: Gross lending on unsecured loans, 2016-20
                                      • Unsecured loans will bounce back as restrictions as lifted
                                        • Figure 15: Market size and forecast for unsecured loans, 2015-25 (prepared in January 2021)
                                        • Figure 16: Market forecast for unsecured loans, 2020-25 (prepared in January 2021)
                                      • Market drivers and assumptions
                                        • Figure 17: Key drivers affecting Mintel’s market forecast, 2015-25 (prepared in January 2021)
                                      • Learnings from the last recession
                                        • Figure 18: Gross lending on unsecured loans, 2007-12
                                      • Forecast methodology
                                      • Market Drivers

                                        • Unsecured lending crashed in April 2020…
                                          • Figure 19: Gross unsecured lending, by category, January 2016-November 2020
                                        • …with lending down by a fifth over the year
                                          • Figure 20: Gross unsecured lending, 2016-20*
                                        • Average indebtedness has risen in recent years
                                          • Figure 21: Net unsecured lending, January 2017-November 2020
                                        • Loan rates have been stable for years
                                          • Figure 22: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, January 2016-December 2020
                                        • Write-offs have been dampened by payment holidays
                                          • Figure 23: Quarterly write-offs of other unsecured lending to individuals, 2015-20
                                        • Lockdown savings could pose a threat to future borrowing
                                          • Figure 24: Monthly changes to household savings deposits, January 2016-November 2020
                                        • The economic recovery will take time
                                          • Figure 25: Annual changes in GDP, and annual average unemployment rate, 2016-25 (forecast)
                                      • Regulatory and Legislative Changes

                                        • Payment holidays have been key to regulatory response to COVID-19
                                          • The CJRS has saved millions of households from serious hardship
                                            • FCA launches review into change and innovation in unsecured credit
                                              • High-cost lenders reminded of their responsibilities following relending review
                                                • New overdraft rules have increased the cost of borrowing
                                                • Companies and Brands – Key Takeaways

                                                  • Lenders focus on existing customers amid COVID-19 difficulties
                                                    • NatWest Group had the biggest loan book in 2019, but has been hurt by COVID-19
                                                      • Adspend fell by 77% in the year to the end of November
                                                      • Market Share

                                                        • COVID-19 leads to significantly reduced loan books
                                                          • NatWest Group had the biggest unsecured loan business in 2019
                                                            • Figure 26: Value of outstanding balances for unsecured personal loan/unsecured lending, by selected providers, 2016-18
                                                        • Competitive Strategies

                                                          • A focus on supporting existing customers
                                                            • Virgin Money launches personal loans to complete product suite
                                                              • Zopa expands beyond loans as it receives UK banking licence
                                                                • Metro Bank purchases RateSetter
                                                                • Advertising and Marketing Activity

                                                                  • Adspend fell almost to a halt in 2020…
                                                                    • Figure 27: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, 2015/16-2019/20
                                                                  • …and dipped below £100,000 in April
                                                                    • Figure 28: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, December 2019-November 2020
                                                                  • Sub- and near-prime lenders continue to lead adspend
                                                                    • Figure 29: Top 10 spenders on advertising for unsecured loans, 2017/18-2019/20
                                                                  • Nielsen Ad Intel coverage
                                                                  • The Consumer – Key Takeaways

                                                                    • COVID-19 has raised concerns, but plans to borrow remain stable
                                                                      • Young families are the core loan audience
                                                                        • The impact of COVID-19 on other markets has harmed loan prospects
                                                                          • Low rates are essential, trust is key, and flexibility can help lenders stand out
                                                                          • Impact of COVID-19 on Consumer Behaviour

                                                                            • Financial wellbeing has held up well despite the pandemic
                                                                                • Figure 30: The financial wellbeing index, January 2016-January 2021
                                                                              • Financial confidence dipped in 2020, but most feel good about the year ahead
                                                                                  • Figure 31: The financial confidence index, January 2015-November 2020
                                                                                • Non-essential spending has been subdued throughout the pandemic…
                                                                                  • Figure 32: Impact of COVID-19 on non-essential spending, April 2020-January 2021
                                                                                • …and a quarter have put off major purchases
                                                                                  • Figure 33: How consumers have been affected or changed their behaviour as a result of COVID-19, 8-13 January 2021
                                                                              • Loan and Credit Product Ownership

                                                                                • Credit ownership has remained broadly stable over the last year
                                                                                  • Figure 34: Loan and credit product ownership, October 2019 vs November 2020
                                                                                • Personal loan ownership peaks among 35-54 year olds
                                                                                  • Figure 35: Structured unsecured loan ownership, by age, November 2020
                                                                                • Most borrowers limit debt to one credit product
                                                                                  • Figure 36: Number of loan and credit products that consumers currently owe money on, November 2020
                                                                                  • Figure 37: Loan and credit product ownership, by number of loan and credit products that consumers currently owe money on, November 2020
                                                                              • Type of Loan Held

                                                                                • Most loans come from traditional lenders
                                                                                  • Figure 38: Type of loan money is owed on, November 2020
                                                                                  • Figure 39: Most recent type of structured personal loan* taken out, November 2020
                                                                                • High cost credit is a young persons’ market
                                                                                  • Figure 40: Type of loan money is owed on (NETs), November 2020
                                                                              • Loan Repayments

                                                                                • Loan repayments represent significant expenses for most borrowers
                                                                                  • Figure 41: Monthly value of repayments to most recent structured personal loan, November 2020
                                                                              • Reasons for Borrowing

                                                                                • The impact of COVID-19 on other markets has harmed loan prospects
                                                                                  • Figure 42: Reasons for taking out most recent structured personal loan, November 2020
                                                                                • Debt consolidation leads reasons for borrowing, but most loans are aspirational
                                                                                • Future Loan Borrowing Plans

                                                                                  • One in seven likely to apply for a loan in the next 12 months
                                                                                    • Figure 43: Likelihood to apply for a new unsecured personal loan in the next 12 months, November 2020
                                                                                  • Financially-secure higher earners are more likely to have loan plans
                                                                                    • Figure 44: Likelihood to apply for a new unsecured personal loan in the next 12 months, by annual household income, November 2020
                                                                                  • Parenthood is a key driver for loans
                                                                                    • Figure 45: Likelihood to apply for a new unsecured personal loan in the next 12 months, by parental status, November 2020
                                                                                • Important Loan Factors

                                                                                  • Ultra-low rates appeal to consumers, but make it hard to stand out
                                                                                    • Figure 46: Important factors when choosing a new loan, November 2020
                                                                                  • Flexibility is a minority consideration
                                                                                    • Figure 47: Important factors when choosing a new loan, by age, November 2020
                                                                                  • Trust can drive repeat business
                                                                                    • Figure 48: Important factors when choosing a new loan, by ownership of a structured unsecured loan, November 2020
                                                                                  • Guaranteed acceptance a nice-to-have, not an essential
                                                                                  • Attitudes towards Unsecured Loans

                                                                                    • Saving for purchases is still the preferred option
                                                                                      • Figure 49: Attitudes towards unsecured loans, November 2020
                                                                                    • COVID-19 concerns are highest among young, ABC1 borrowers
                                                                                      • Figure 50: Unsecured Loans – CHAID – Tree output, November 2020
                                                                                    • Trust issues hold back potential customers
                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                        • Abbreviations
                                                                                          • Consumer research methodology
                                                                                            • CHAID Methodology
                                                                                              • Figure 51: Unsecured Loans – CHAID – Table output, November 2020

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