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UK Unsecured Loans market report

Everything you need to make the right decisions

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

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Products covered in this Report

This Report looks at the unsecured loans market in the UK. This includes personal loans and high-cost short-term credit loans including payday loans. It does not cover analysis of business loans, or secured loans, which are typically secured against the borrower’s property (see Mintel’s Secured Loans – UK, February 2016 report).

For the purposes of this report, the following definitions apply: 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.

High-cost short-term credit loans and payday loans are defined as unsecured loans of value under £1,000 with a repayment term of less than one year.

Peer-to-peer (P2P) loans are personal loans lent through a P2P platform, which matches savers and borrowers to cut out the role of banks in lending money to consumers. P2P loans are typically available from £1,000 up to a value of £25,000

Expert analysis from a specialist in the field

Written by Sam Marks, a leading analyst in the Finance sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The unsecured loans market has experienced continuing growth over the last five years due to strong consumer confidence and record-low interest rates. However, looking ahead concern over rising levels of household debt has resulted in government intervention which may slow growth in this market Sam Marks
Research Analyst, Financial Services

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Unsecured lending continues steady growth
              • Figure 1: Forecast of the value of unsecured personal loans, by gross advances, 2012-22
            • More than half of borrowers arranged their loan online
              • Figure 2: Loan arrangement methods, October 2017
            • Bank of England’s base rate rises to 0.5%
              • Companies and brands
                • Tesco Bank is the market leader for personal loans
                  • Figure 3: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014, 2015 and 2016
                • Adspend for unsecured loans rose by 20% in 2016/17
                  • Figure 4: Total above-the line, online display and direct mail advertising expenditure on loans, 2012/13-2016/17
                • Traditional lenders have high levels of popularity
                  • Figure 5: Attitudes towards and usage of selected brands, November 2017
                • The consumer
                  • Majority of consumers owe money on a loan or credit product
                    • Figure 6: Loan and credit product ownership, October 2017
                  • Consumers most likely to borrow from a bank, building society or major retailer
                    • Figure 7: Type of personal loan, October 2017
                  • Majority of borrowers do not know what their interest rate is
                    • Figure 8: Rates paid on recent loans, October 2017
                  • Over half of borrowers took out their most recent loan within the last two years
                    • Figure 9: Timing of most recent loan, October 2017
                  • Acceptance can be more important than rate
                    • Figure 10: Borrowing behaviours, October 2017
                  • 60% of consumers want to view all their borrowing/debts in one place
                    • Figure 11: Attitudes towards borrowing, October 2017
                  • Only 7% of people pay to receive a regular credit report
                    • Figure 12: Paying for monthly credit reports, October 2017
                  • What we think
                  • Issues and Insights

                    • Open Banking is the next stage of evolution for arranging and managing personal loans
                      • The facts
                        • The implications
                          • Traditional lenders are best positioned in the market
                            • The facts
                              • The implications
                                • Soft-searches help find acceptance
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Unsecured lending continues steady growth
                                        • Growth expected to be slow but steady
                                          • More than half of borrowers arranged their loan online
                                            • Open Banking will give lenders a new platform
                                              • Lending criteria to be tightened amid Bank of England warning
                                                • Bank of England’s base rate rises to 0.5%
                                                  • Write-offs fell to below £1 billion in 2016
                                                  • Market Size and Forecast

                                                    • Unsecured lending continues steady growth
                                                      • Figure 13: Gross unsecured lending, 2012-16
                                                      • Figure 14: Gross unsecured lending, 2012-17 (est)
                                                    • Credit card lending keeps pace for 2017
                                                      • Growth in ‘other’ consumer credit slows
                                                        • Unclear Brexit direction is causing problems for the car finance market
                                                          • Big purchases may be put on hold
                                                            • Overdrafts are in decline
                                                              • Figure 15: Other consumer credit, 2012-17 (est)
                                                            • Growth expected to be slow but steady
                                                                • Figure 16: Forecast of the value of unsecured personal loans, by gross advances, 2012-22
                                                                • Figure 17: Forecast for gross lending for personal loans, 2012-22
                                                            • Channels to Market

                                                              • More than half of borrowers arranged their loan online…
                                                                • … Whilst two fifths of borrowers opted for more traditional channels
                                                                  • Figure 18: Loan arrangement methods, October 2017
                                                                • Traditional lenders boosted by online banking traffic
                                                                  • Arranging loans online could help to find better value
                                                                    • Figure 19: Loan arrangement methods, by rates paid on recent loans, October 2017
                                                                • Market Drivers

                                                                  • Open Banking will give lenders a new platform
                                                                    • P2P continues to build on last year’s success
                                                                      • Term Funding Scheme due to close
                                                                        • Lending criteria to be tightened amid Bank of England warning
                                                                          • Bank of England’s base rate rises to 0.5%
                                                                            • Figure 20: £5,000 and £10,000 Loan Interest rates, average credit card rates, LIBOR, and base rate, January 2013-November 2017*
                                                                          • Concern for those struggling with their financial obligations
                                                                            • Figure 21: Consumers’ financial situation, June 2017
                                                                          • Write-offs fell to below £1 billion in 2016
                                                                            • Figure 22: Annual write-offs of other unsecured lending to individuals, 2012-16
                                                                        • Companies and Brands – What You Need to Know

                                                                          • Tesco Bank is the market leader for personal loans
                                                                            • Lenders compete to attract customers
                                                                              • Soft-searches are becoming more common
                                                                                • Adspend for unsecured loans rose by 20% in 2016/17
                                                                                • Market Share

                                                                                  • Tesco Bank is the market leader for personal loans
                                                                                    • Figure 23: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014, 2015 and 2016
                                                                                  • Supermarkets have shown the strongest growth
                                                                                  • Competitive Strategies

                                                                                    • Lenders compete to attract customers…
                                                                                      • …by slashing prices
                                                                                        • …and increasing accessibility
                                                                                          • Soft-searches are becoming more common
                                                                                            • Employee lenders lead the way
                                                                                              • The UK trails in chatbot tech for lending
                                                                                              • Advertising and Marketing Activity

                                                                                                • Adspend for unsecured loans rose by 20% in 2016/17
                                                                                                    • Figure 24: Total above-the line, online display and direct mail advertising expenditure on loans, 2012/13-2016/17*
                                                                                                  • QuickQuid spends most on advertising
                                                                                                    • Figure 25: Top 20 spenders on advertising for unsecured and payday loans, 2014/15-2016/17**
                                                                                                  • TV is the major media platform
                                                                                                    • Figure 26: Advertising spend for loans, by media type, 2016/17*
                                                                                                  • Nielsen Ad Intel coverage
                                                                                                  • Brand Research

                                                                                                    • What you need to know
                                                                                                      • Figure 27: Attitudes towards and usage of selected brands, November 2017
                                                                                                    • Key brand metrics
                                                                                                      • Figure 28: Key metrics for selected brands, November 2017
                                                                                                    • Brand attitudes: Tesco Bank stands out for rewarding loyalty
                                                                                                      • Figure 29: Attitudes, by brand, November 2017
                                                                                                    • Brand personality: Nationwide and The AA seen as most accessible
                                                                                                      • Figure 30: Brand personality – Macro image, November 2017
                                                                                                    • Payday lenders seen as irresponsible
                                                                                                      • Figure 31: Brand personality – Micro image, November 2017
                                                                                                  • Brand analysis

                                                                                                    • Traditional lenders have high levels of popularity
                                                                                                      • Non-financial brands benefit from high awareness
                                                                                                        • Specialist lenders are the least trusted
                                                                                                        • The Consumer – What You Need to Know

                                                                                                          • Majority of consumers owe money on a loan or credit product
                                                                                                            • Consumers most likely to borrow from a bank, building society or major retailer
                                                                                                              • Majority of borrowers do not know what their interest rate is
                                                                                                                • Over half of borrowers took out their most recent loan within the last two years
                                                                                                                  • Acceptance can be more important than rate
                                                                                                                    • Only 7% of people pay to receive a regular credit report
                                                                                                                    • Loan and Credit Product Ownership

                                                                                                                      • Majority of consumers owe money on a loan or credit product
                                                                                                                        • Figure 32: Loan and credit product ownership, October 2017
                                                                                                                      • Consumers with loans seek improved accessibility
                                                                                                                        • Borrowing to make ends meet
                                                                                                                          • Nearly one in three people owe money on two or more products
                                                                                                                            • People with low savings are more likely to owe on multiple products
                                                                                                                              • Figure 33: Repertoire of loan and credit ownership, October 2017
                                                                                                                          • Type of Personal Loan

                                                                                                                            • Consumers most likely to borrow from a bank, building society or major retailer
                                                                                                                                • Figure 34: Type of personal loan, October 2017
                                                                                                                              • Young people have more high cost credit
                                                                                                                              • Rates Paid on Unsecured Loans

                                                                                                                                • Majority of borrowers do not know what their interest rate is
                                                                                                                                  • Figure 35: Rates paid on recent loans, October 2017
                                                                                                                                • Aggregation can help consumers to keep track
                                                                                                                                  • Figure 36: Rates paid on recent loans, October 2017
                                                                                                                                • More young people arrange borrowing online
                                                                                                                                  • Figure 37: Loan arrangement methods, October 2017
                                                                                                                              • Timing of Most Recent Loan

                                                                                                                                • Over half of borrowers took out their most recent loan within the last two years
                                                                                                                                  • Figure 38: Timing of most recent loan, October 2017
                                                                                                                                • Structured loans market may have benefited from payday struggles
                                                                                                                                  • Figure 39: Type of personal loan, by timing of most recent loan, October 2017
                                                                                                                              • Borrowing Behaviours

                                                                                                                                • Acceptance can be more important than rate
                                                                                                                                  • Figure 40: Borrowing behaviours, October 2017
                                                                                                                                • Being accepted is even more important for 18-44s
                                                                                                                                  • AI could engage young borrowers
                                                                                                                                  • Attitudes towards Borrowing

                                                                                                                                    • 60% of consumers want to view all their borrowing/debts in one place
                                                                                                                                      • Consumers look for convenience
                                                                                                                                        • Figure 41: Attitudes towards borrowing, October 2017
                                                                                                                                      • Millennials have the most to gain from Open Banking
                                                                                                                                        • Figure 42: Response to the statement ‘I would like to view all my borrowing/debts from different providers in one place’, by generation, October 2017
                                                                                                                                    • Credit Reports

                                                                                                                                      • Only 7% of people pay to receive a regular credit report
                                                                                                                                        • Figure 43: Paying for monthly credit reports, October 2017
                                                                                                                                      • Almost two fifths of consumers have signed up or are interested in a free credit report
                                                                                                                                        • Figure 44: Attitudes towards credit reports, October 2017
                                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                        • Abbreviations
                                                                                                                                          • Consumer research methodology
                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                            • Additional best/ worst forecast table
                                                                                                                                              • Figure 45: Best and worst case forecasts for the value of unsecured personal loans, by gross advances, 2017-22
                                                                                                                                            • Forecast methodology