A personal loan is a sum of money that you can borrow in order to use it for various purposes. According to TSB data, the UK unsecured loan market accounts for around £23 billion of the UK economy annually.
Personal loans account for the largest share of household financial debt with total aggregate household debt in Britain of around £1.28 trillion (Statista). The prevalence of personal loans has increased in recent years, exacerbated by the financial impact of the coronavirus pandemic. As a result, much of the negative stigma surrounding personal loans is also disappearing.
How much do people borrow?
According to data from the Guardian, 28% of personal loan applicants have applied for loans for at least half of their annual income. Generally speaking, the minimum amount you can borrow for a personal loan is £1,000 (HSBC).
However, the exact amount you can borrow will depend on the specific loan provider and a range of factors such as income and credit rating. People apply for these loans for a variety of reasons, including financing vacations, home improvement projects, debt consolidation, or buying a car.
Are applications for personal loans increasing in the UK?
Personal loans, as well as other forms of short-term borrowing, have grown in popularity in recent years. The coronavirus pandemic and its financial impact has seen more consumers than ever turn to personal loans to finance their purchases.
Although the pandemic has led a number of lenders to reduce the volume of their offer or to tighten their lending criteria, it seems that as the economy recovers, lenders are starting to expand their offers.
The choice of personal loan products available to UK borrowers has shrunk since the start of last year. Namely, 46 personal loan products were available on the market in January, the number of which fell to 45 in April and then to 43 in August 2020. The coronavirus epidemic is the main culprit for this drop, limiting the number of options available to Brits. borrowers.
Another key factor in this increase has been the accessibility of loans with personal loans available at the click of a button from several online lenders. There has also been an increase in the type of personal loans available to meet this demand.
Since personal loans are a type of unsecured loan, it is easier to get approved than a secured loan and less risky for the borrower. This is another reason why the demand for this particular type of loan has increased.
For some, and in the case of owners, online searches for terms such as “sell your house fastand “online secured lending” have increased as potential borrowers seek ways to unlock more equity from their properties, often their most valuable asset. In addition, capital release and other property-related financial arrangements are also gaining popularity, reflecting people’s need for credit and financial assistance.
At this particular time, personal loan interest rates are lower than they have been (both month-over-month and year-over-year).
Regarding the rates of 3-year fixed rate personal loans and 5-year fixed rate personal loans, the interest rates are more favorable than before for borrowers. For those with good credit, now may be the time to take advantage of low interest rates and take out a personal loan.