The Rise of the Personal Loan infographic

The Rise of the Personal Loan

MoneySuperMarket analyses 3 million loan enquiries to reveal how much Brits want to borrow and what they plan to spend it on.

  • In 2016, Brits wanted to borrow a total of £12.4 billion through personal loans, or £8,765 per person.
  • The amount the average enquirer would like to borrow has increased by £308 since 2015, with people most interested in taking out larger loans to pay for weddings and cars.
  • One in four people would like to borrow the equivalent of at least 50% of their annual income.
  • Corby in the East Midlands emerges as Britain’s loan enquiry capital after also recently being named the “unhappiest” place in the country.

Every 21 seconds, someone in Britain uses MoneySuperMarket to find out how much they could borrow using a personal loan and what it’d cost to pay it back. For the first time, MoneySuperMarket has analysed more than 3 million loan enquiries made through our Smart Search tool to reveal how much the average person wants, what they plan to spend it on, and how enquiries have changed since 2015.

 

Personal loan enquiry hotspots

In 2016, the total amount MoneySuperMarket loan enquirers wanted to borrow was £12.4 billion, or £8,765 per person. Divided between every UK adult, including those who didn’t enquire about a loan in 2016, that equates to £251 each.

People in the North East are more interested in loans than people living in any other region. Between January 2015 and March 2017, residents in the North East made 59 loan enquiries per 1,000 people, which was 16% higher than the national average. The North West and Wales ranked second and third highest, at 57.1 and 55.2 per 1,000 people respectively.

Fourteen of the 20 local authorities with the lowest loan enquiry rates are in London, with residents in Kensington and Chelsea – the most unaffordable borough in the capital – making the fewest. Its loan enquiry rate is 59% lower than the national average and 48% lower than the London average. However, the average amount residents in this wealthy borough want to borrow, at £14,699, is 64% higher than the typical Brit. Overall in London, 39.7 per 1,000 people enquired about a loan, which was 33% lower than the North East and 11.4% lower than neighbouring East England.

Corby, Northamptonshire – lots of loan enquiries and not very happy?

The East Midlands town of Corby, in Northamptonshire, was responsible for more loan enquiries between January 2015 and March 2017 than any other location in the United Kingdom. 75.5 per 1,000 residents considered their borrowing options using MoneySuperMarket’s Smart Search tool, which is 47% more than average. Its enquiry rate is 9% higher than second-place Halton, in the North West. In contrast, Halton and the locations in third, fourth and fifth positions all have very similar enquiry rates, with no more than 2% between them.

Corby recently made the news for being the unhappiest place in the UK, after residents scored their life satisfaction 6.86 out of 10, compared to 7.65 nationally. While it’s possible there’s a link in Corby between unhappiness and loan enquiries (one in five children lives in poverty and the area has the 4th highest teen pregnancy rate), our enquiry data doesn’t closely correlate with unhappiness in every local authority. This is because loans mean different things to different people and there can be a big difference between the reasons they’re needed (for instance, paying off existing debt versus financing a dream wedding).

One thing that does unite the whole country, though, is that Brits now broadly want to borrow more than they did in 2015.

There are variations in the amount people want to borrow with a personal loan according to the time of year. The main high points are the weeks either side of Christmas, and during August and September.

The reasons for the increases at these times include funding (or paying for) Christmas, booking a holiday, planning a wedding and buying a car with the latest number plate (these are issued on new vehicles from 1 March and 1 September each year.

 

Average borrowing amount

Loan amounts spike the most in the East Midlands

While the average amounts people want differ by region, ranging from a high of £9,787 in London to a low of £8,253 in the North East, since 2015 there has been a nationwide increase in the average amount Brits want to borrow. Nationally, the average amount people wanted increased £308 between 2015 and 2017, from £8,650 to £8,958 – and that’s after adjusting for inflation.

People in the East Midlands wanted to borrow £482 more in the first quarter of 2017 compared to the same period in 2015, which is a larger increase than in any other region. London is second, with residents wanting to borrow the most (£9,787) and feeling they need £457 (4.9%) more in 2017 than in 2015.

The average amount Londoners wanted in Q1 2017 was £1,534 more than people in the North East. Interestingly, although people living in the North East have the highest enquiry rate per capita, they wanted to borrow the smallest amount and their average hasn’t changed in the last two years.

Many people want to borrow as much as they earn

When the typical person enquires about a loan, they say they’d like to borrow the equivalent of 36% of their annual income. In 2016, over 300,000 people, or one in four enquirers, wanted to borrow at least half of their annual income. Furthermore, 6-10% of enquirers last year, numbering at least 75,000 people, said they wanted to borrow more than they earned in 12 months. On average, this group requested 140% of their annual salary, equating to an extra £5,058.

Britain's loan enquiry capitals

Wedding bells in Newham, new wheels in Flintshire

Compared to the national average, loan enquiries in London are few and far between, but when looking at loans specifically intended to pay for weddings, Newham ranks highest. Between 2015 and 2017, 2.7 per 1,000 Newham residents enquired about a wedding loan through MoneySuperMarket, which was more than double the national average.

Newham made the news last year for being the number one UK debt hotspot according to Experian and debt charity StepChange, who showed that residents reported more financial problems and sought more professional debt advice over the past five years than anywhere else. This was attributed to a higher than average proportion of families living in rented accommodation on low incomes.

Knowsley in the North West is the capital for two loan purposes: home improvements and holidays. Residents there made 152% more enquiries into borrowing money to go on holiday than the national average.

Personal loans for cars, which account for 38% of all MoneySuperMarket enquiries, are most popular in Flintshire, Wales, with residents making 44% more enquiries than the national average.

 

Loan types

Here comes the bride’s loan

One in four MoneySuperMarket loan enquiries concerns borrowing money to consolidate existing debt, which – although sometimes a good way to simplify monthly repayments – can lead to a higher interest rate. At just over £9,000, the average debt consolidation loan, barely changed between the first quarter of 2015 and the same period in 2017. The average person wants a bit more than that for a home improvement, at £10,357, which is a 2% increase compared to 2015. Holiday loan amounts have seen a similar increase, at 2.2%, with the average now at £2,973. That’s enough for a 13-night cruise in the Caribbean.

Holiday loan enquiries peak on June 24th, when the proportion of people who want to borrow money to pay for a trip is twice the typical level.

Brits want to borrow 6.6% more in 2017 than 2015 in the form of a car loan (£8,812 vs. £9,393), which is an increase of £581. That could buy 500 litres of fuel, enough to drive from Land's End to John o' Groats six times.

Wedding loans have seen a larger increase in the average amount enquirers want to borrow than any other purpose, rising 8.4% between 2015 and 2017. The average enquirer now wants £7,461 to pay for their wedding (or someone else’s), which is £589 more than in 2015. Research by Bridebook.co.uk found that the average cost of a wedding increased by £487 between 2016 and 2017, which is another signal that Brits are increasingly interested in splashing out on their big day.

The big picture – rates on loans remain competitive, but borrowers need to be wise

MoneySuperMarket’s data shows that Brits wanted to borrow more in the first three months of 2017 than 2015, particularly to finance weddings and cars. This may in part be driven by consistently competitive interest rates offered by lenders. For instance, quoted rates on a £10,000 loan are still at a historical low and rates on new £5,000 loans fell between January and March.

The wide range of options for consumers means more choice, but it’s important to never take on debt you can’t afford to repay. For more information, check out our loans portal.

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Sources

  • Study based on MSM data 2016
  • “...with two-third using a price comparison site to find the best deal.”
    Financial Conduct Authority, Credit Card Market Study (MS14/6.3)

  • British Credit Card Capitals: “...more than one hundred different credit cards.”
    As listed on MoneySuperMarket in February 2017

  • British Credit Card Capitals: “...mapping more than 1.1 million enquiries.”
    Includes all unique credit card Smart Searches on MoneySuperMarket.com across the four card categories in 2016

  • Paying Off Debt, Borrowing, Building Credit History, Spending
    The four credit card categories are informed by a summary given in ‘FCA Credit card market study: interim report November 2015’

  • “...about half of accounts repay the full amount of the transferred balance by the end of the promotional period…”
    FCA Credit card market study: interim report November 2015

  • ClearScore research ranks Blackpool 3rd worst for average credit score.
    http://www.thisismoney.co.uk

  • Income deprivation estimates from governments of UK nations:
    England: http://opendatacommunities.org

          Wales: https://statswales.gov.wales

          Scotland: http://www.gov.scot

          N. Ireland: http://www.nisra.gov.uk

  • “FCA research that shows 20% of people with credit building cards exceed their credit limit…”
    FCA Credit Card Market Study Annex 1: Further feedback on interim findings

  • National annual income estimates, by ONS.
    https://www.ons.gov.uk
  • Rates of homeownership and private renting across the UK, from ONS:
    https://www.gov.uk

  • “According to the British Bankers’ Association, in January 2016, more than half a million people transferred a collective £1.4 billion to new accounts.”
    https://www.theguardian.com