Increase of Personal Loans is Four Times Faster Than Wages

The years of 2016 and 2017 meant loans worth £37bn for UK households, as shown by the UK Finance’s published data. This also means a growth of four times faster than the wages – which means that loans now stand at an outstanding value.

While the Financial Conduct Authority (FCA) has stated that most of the loans involved people that could afford repayments, the Christians Against Poverty (CAP), a charitable company, said that, since their founding in 1996, the month of January 2018 has been the most busiest month ever, in regard to the amount of people that came seeking debt advice.

Other statistics, made public by the same UK Finance, have revealed that the loans’ value has increased by 25% in the past 4 to 5 years. In order for a comparison to be made, wage data published by the Office for National Statistics (ONS) showed that payment of full-time workers has increased only by 6.5% since 2013-2014.

This means that most people are borrowing a lot more than they earn, which will lead to their inability to repay their loans. It is also reported that some of them end up borrowing money to pay for food.

Media reports that some people have accumulated debts reaching nearly £28,000, made through bank lending and credit cards, over a period of 8 years. One manager of the Christians Against Poverty (CAP) charity, Daniel Kelly, said that they estimate about eight million people are worrying about how they’re going to pay the bills.

Furthermore, the BBC England Data Unit has made an analysis, which reveals that the regions in which the median pay for full-time workers has seen the lowest increase have the largest increases in unsecured personal loans. Also, the biggest rise in unsecured lending, meaning an average of 43%, has been seen in the St Albans’ households.

All of this being said, the Bank of England warned about a danger to the UK economy, that if these personal loans would have a sudden rise. This warning is a result of the £1.5t of debt (including mortgage debt) the UK households currently owe.

Still, something important to remember is the fact that the aforementioned statistics don’t involve all the sources of credit. They exclude car loans, payday lenders, and student loans.

One interesting thing is the fact that, while most charities state that they have people already struggling with debt and the bank is willing to offer them more money – thus making irresponsible lends -, most finance spokespersons say otherwise. They say that whenever one comes to apply for credit, they assess the risks of the customer’s finances accordingly. They also say that most of the borrowers have no problem in repaying their loans.

Taking into account the statement of the Money Buddies charity in Leeds, saying that they had a client that was six months pregnant, on maternity leave, that was successfully signed up for a £20,000 unsecured loan from her bank, one should be very careful when deciding to borrow money, in order to avoid any unsecured personal loans.