Skip to content

The changing face of consumer lending


The combined effect of the rising cost of living, the higher base rate, and low wage growth means many UK households are struggling to make ends meet. Earlier this year, the Office for National Statistics (ONS) revealed that one in five adults (around 11.5 million consumers) increased their borrowings year-on-year. Almost a third of those surveyed by the ONS said that they would be unable to afford an unexpected expense without recourse to consumer credit options.

Recent Bank of England statistics show that average net borrowing statistics have remained stubbornly high since the start of 2022, split roughly 50/50 between personal loans and credit card debt. But base rate rises mean that the cost of consumer borrowing is going up. In May, average rates on credit cards reached 22.76%, their highest level since 1997, while overdraft charges hovered at around 21.7%.

Banks continue to offer the best rates for individual borrowers, but these prices are going up too. In May, the effective rate on new personal loans was 8.27%, although the actual rate depends on the borrower’s credit score and the terms of the loan. Just two years ago, it was possible to get a personal loan with an interest rate as low as 2.16%. The dramatic increase in the cost of credit has long-term repercussions for the consumer lending market - and for those who may need to borrow to cover day-to-day expenses.

George Huntley, chief executive of The Money Platform commented ‘Demand is increasing, as more people are locked out of mainstream credit. This pre-dates the cost-of-living crisis. The number of people with access to a credit cards or overdraft facilities has been declining for several years now. Before the Ukraine War, the Centre for Social Justice estimated that 1.08 million were using illegal lenders.’

A clutch of alternative lenders are responding to unmet demand for consumer finance. These include consumer-focused peer-to-peer lending platforms like short-term consumer lender Fund Ourselves, alternative credit card provider Elfin Market, education finance platform Lendwise, P2P pawnbroker Unbolted, short-term lender The Money Platform, and new kid on the block Plend, which has yet to open to retail investors. They share a common mission: to bring affordable and accessible financing solutions to people who truly need them, funded by retail investors.