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Unsecured Loans - UK - January 2016

Published By :

Mintel

Published Date : Jan 2016

Category :

Banking

No. of Pages : N/A

The unsecured personal loans market is expected to have grown by 12% in 2015, with easing credit conditions and growing consumer confidence leading to an increased demand for credit. However, peer-to-peer lending platforms are making waves in the market, with consumer awareness and consideration growing for these products. This will disrupt high street lenders

Table of Content

Introduction

Executive Summary

The market
Estimated market growth of 12% in 2015
Figure 1: Forecast of the value of unsecured personal loans, by gross advances, fan chart, 2010-20
Online is the most popular channel
Figure 2: Channel used to apply for loan, October 2015
Key players
Lloyds Banking Group remains the market leader
Figure 3: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2013 and 2014
Advertising spend increases by over half
Figure 4: Advertising spend on loans, 2010/11-2014/15
High street retail banks continue to be most trusted and used brands
Figure 5: Attitudes towards and usage of selected brands, November 2015
The consumer
Most people have a credit/loan product
Figure 6: Loan and credit product ownership, October 2015
Over half owe less than £3,000
Figure 7: Amount owed on all loans and credit products, October 2015
Over a fifth have a loan to pay for a car/vehicle
Figure 8: Reason for loan ownership, October 2015
Majority remain opposed to payday loans
Figure 9: Payday loan usage and consideration, October 2015
No debt is seen as good debt
Figure 10: Attitudes towards borrowing, October 2015
15% would be interested in borrowing from a peer-to-peer lender
Figure 11: Attitudes towards peer-to-peer lending, October 2015
What it means

Issues and Insights

Peer-to-peer platforms: turning lenders into borrowers
The facts
The implications
Payday loans have scope to move away from being a last resort product
The facts
The implications
Smart searches will resolve concerns over credit checks
The facts
The implications

The Market – What You Need to Know

Unsecured lending market growing
Nearly half purchase online
Competitive environment drives down the cost of loans
Consumer confidence is increasing
Write-offs in lending continue to drop

Market Size and Forecast

Unsecured lending market growing
Figure 12: Gross unsecured lending, 2011-15
16% growth for unsecured personal loans
Figure 13: Other consumer credit, 2011-15
Market forecast
Figure 14: Forecast of the value of unsecured personal loans, by gross advances, fan chart, 2010-20
Figure 15: Forecast of the value of unsecured personal loans, by gross advances, 2010-20
Forecast methodology

Channels to Market

Online is the most popular channel…
but some still prefer to purchase offline
Borrowers go direct
Figure 16: Channel used to apply for loan, October 2015
Under-45s more likely to purchase online
Figure 17: Channels used to apply for loan, by age, October 2015

Market Drivers

Competitive environment drives down the cost of loans
Figure 18: £5,000 and £10,000 loan interest rates, LIBOR, and base rate, November 2009-November 2015
FCA regulation hits payday lenders
FCA to investigate the collection of unsecured debts
Consumer confidence is increasing
Figure 19: Financial confidence, January 2009-October 2015
Write-offs in lending continue to drop
Figure 20: Annual write-offs of other unsecured lending to individuals, 2010-14
P2P loans maintain popularity

Key Players – What You Need to Know

Lloyds Banking Group remains the market leader
High street banks target existing customers
Advertising spend increases by over half
High street banks have consumer trust

Market Share

Lloyds Banking Group remains the market leader
Supermarket banks’ share of the market grows
Figure 21: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2013 and 2014

Competitive Strategies

High street banks attract existing customers
Price guarantees ensure competitiveness
Guarantor replace payday loans
PCWs lead the way in more transparent lending

Advertising and Marketing Activity

Adspend on unsecured loans increases by over half
Figure 22: Total above-the line, online display and direct mail advertising expenditure on loans, 2010/11-2014/15
Subprime lenders dominate advertising space
Supermarkets strong competitors for business
P2P lenders increase spend
Figure 23: Top 20 spenders on advertising for unsecured and payday loans, 2012/13-2014/15
Lenders spend on TV advertising
Figure 24: Advertising spend for loans, by media type, 2014/15
Loan providers compete for online presence
Nielsen Media Research coverage

Brand Research

What you need to know
Brand map
Figure 25: Attitudes towards and usage of selected brands, November 2015
Key brand metrics
Figure 26: Key metrics for selected brands, November 2015
Brand attitudes: Tesco Bank noted for rewarding loyalty
Figure 27: Attitudes, by brand, November 2015
Brand personality: Wonga most likely to be seen as unethical
Figure 28: Brand personality – macro image, November 2015
Most brands located around competency, reliability and customer service traits
Figure 29: Brand personality – micro image, November 2015

Brand Analysis

High street retail banks continue to be most trusted and used brands
Santander particularly stands out as being in an advantageous position
Loan specialists suffer from stronger negative perceptions than other brands
Brands aligned to retailers show potential for growth
Yorkshire Bank has regional strength but is limited by narrower-reaching network

The Consumer – What You Need to Know

Nearly a fifth owe money on an unsecured loan
Over half owe less than £3,000
Over a fifth have a loan to pay for a car/vehicle
Consumers consider brand reputation
Payday loans usage not limited to those who are financially struggling

Loan and Credit Product Ownership

Nearly two thirds own a credit or loan product
Nearly a fifth owe money on an unsecured loan
Credit card deals rival personal loans
Figure 30: Loan and credit product ownership, October 2015
Parents are twice as likely to have a personal loan
Figure 31: Loan and credit product ownership, by parent (of under-16s), October 2015
Nearly half own only one type of credit or loan product
Personal loan ownership higher among experienced borrowers
Figure 32: Loan and credit product ownership, by repertoire of loan and credit products ownership, October 2015

Amount Owed on Loan and Credit Products

Over half owe less than £3,000
Figure 33: Amount owed on all loans and credit products, October 2015
Under-45s more likely to have lower levels of debt
Figure 34: Amount owed on all loans and credit products, by age, October 2015

Reasons for Loan Ownership

Over a fifth have a loan to pay for a car/vehicle
Under-45s are more likely to be taking out a loan to help make ends meet
Figure 35: Reason for loan ownership, October 2015

Payday Loans – Usage and Consideration

Majority remain opposed to payday loans
Figure 36: Payday loan usage and consideration, October 2015
Payday loans used by those with savings
Figure 37: Payday loan ownership, by value of savings and investments, October 2015

Attitudes towards Borrowing

No debt is good debt
Consumers consider brand reputation…
but a competitive rate will provide opportunities for new brands
Concerns about passing a credit check
Figure 38: Attitudes towards borrowing, October 2015
Nearly a third of loan holders are considering taking out another loan
Figure 39: Agreement with attitudes towards borrowing statements, by unsecured loan ownership, October 2015
Larger households would benefit from combining debts
Figure 40: Attitudes towards borrowing – CHAID – Tree output, October 2015

Attitudes towards Peer-to-Peer Lending

15% would be interested in borrowing from a peer-to-peer lender
Figure 41: Agreement with the statement ‘I would be interested in borrowing money from a peer-to-peer lending site in the future’, by agreement with the statement ‘I am considering taking out a loan in the next 12 months’, October 2015
IFISA will draw attention to P2P borrowing
Traditional lenders have consumer trust
Figure 42: Attitudes towards peer-to-peer lending, October 2015

Appendix – Data Sources, Abbreviations and Supporting Information

Report scope and definitions
Data sources
CHAID analysis methodology
Abbreviations

Appendix – Market Size and Forecast

Figure 43: Best- and worst-case scenario forecast – Value of unsecured personal loans, by gross advances, 2015-20
Forecast Methodology

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