Sharp increase in UK borrowers taking out payday loans
In latest data provided by the Financial Conduct Authority, it has been revealed that there has been a sharp increase in the number of borrowers in the UK taking out payday and other kinds of short-term loans in the last year. It is estimated a staggering 5.4 million loans for people with bad credit were taken out in the year up to June 2018. Comparatively, this is a huge jump when taking account of the statistics for the year previously.
The huge increase in payday loan borrowing
In 2017, it was estimated that just 4.6 million was taken out for the same period in the UK. Furthermore, the amount being borrowed when taking out these payday loans or other short-term loans involving high-cost credit has soared too. Between July 2016 and June 2017, just under £1 billion was taken out as a loan by UK borrowers. Whilst between July 2017 and June 2018, this number had increased to an estimated £1.3 billion. But in terms of the total amount of payable, this was a whopping £2.1 billion.
What has been the average loan value?
More and more people across the country are applying for different kinds of short-term finance, and they are mostly young in age.
It has also been revealed that the average loan value amount UK customers are taking out for a payday or other kinds of short-term loan has seen an increase too. Up to June 2018, data shows that the average amount borrowed has been £250, with this loan value increasing in the Greater London area, where the average for this kind of loan was around £284.
However, the actual amount the average UK borrower ended up repaying was £413, which is around 1.65 times higher than the amount they had originally borrowed.
How old is the average borrower?
The Financial Conduct Authority also found out that the typical borrower was young. Statistics show that roughly 38% of those who were taking out a loan was between the ages of 25 to 34. Many of them were also tenants (an estimated 30% of borrowers) or they were still living with their parents, accounting for 26%.
In terms of whereabouts in the country people are borrowing, the FCA data shows that the North West region of the UK has the highest number of payday and short-term loans taken out in the UK. This is at a typical rate of 125 per 1,000 people. Meanwhile, Northern Ireland had the lowest rates of borrowing, with the number of loans taken out of this kind averaging at 74 per 1,000 people.
Whilst new regulations implemented by the FCA have had a number of positive effects on the payday loan industry, there is still more that can be done to make sure it is fairly regulated.
Nevertheless, whilst the number of payday loans and short-term loans has increased, it is still lower than it was in 2013. This is due to a variety of reasons. For example, since 2014, the FCA has implemented a number of new rules in order to ensure better regulation of the payday loan industry. In 2015, the FCA introduced a price cap of 0.8% per day on payday loans on the amount that had been borrowed. This reduced the number of providers available in the payday loan industry, from 106 firms in 2016 to just under 88 now.
Nevertheless, the problem of interest rates still very much remains an issue when it comes to the payday and short-term loan market. Despite the number of FCA regulations that have been put in place, nothing has been done to ensure interest rates are fairer for borrowers. For example, many borrowers across the country can still face average interest rates of a shocking 1,250% in total. Whether this issue will be addressed by the FCA remains unknown.