Millions more Brits lock credit from traditional lenders

Millions more Britons can no longer access credit from traditional lenders as ‘financial exclusion’ rises

  • One in five people say they feel excluded from the financial system
  • Around 20 million people in the UK struggle to access credit
  • Nearly half of borrowers with loans report making minimum monthly payments
  • 18% of people had to borrow money because of the pandemic

More than a third of Britons say they are financially unprepared for an emergency and more than a quarter say they are worse off than before the pandemic, according to a new study.

Access to affordable credit can be important for people’s financial stability, but one in five people report feeling excluded from the financial system – around 11 million people – according to London lender Plend’s 2022 Financial Inclusion Report.

This rises to 38% of people from a black ethnic group and 32% of all ethnic groups who feel they cannot access financial services in the UK.

The Covid-19 pandemic has had an impact on finances, with 18% of respondents saying they had to borrow money due to the pandemic.

Three in five respondents to the survey, conducted in January by Opium Research, say they use some form of credit.

Credit cards account for the majority of borrowing, followed by buy-now-pay-later loans.

However, despite the large number of people using credit, many are struggling to repay their loan.

Half of those with a loan said they struggled to repay it, compared to 38% of those with a credit card and 37% of BNPL users.

The average amount borrowed through a loan is £8,200, with men borrowing significantly larger amounts (£9,952) than women (£6,347).

Loan interest rates averaged 16.3% according to respondents, with the figure rising to 21.6% for those under 34.

Almost a fifth of respondents said they did not know the interest rate they were currently paying on their loans.

According to the financial wellbeing and education charity money charity346 people a day were declared insolvent or bankrupt in England and Wales from February to April 2022. This equates to one person every four minutes.

Nearly half of those who use credit say they simply repay minimum payments each month, and one in ten are unable to manage even minimum payments.

This, says Plend, indicates an absence of affordable credit products on the market.

Plend defines financial exclusion as: when a person is penalized for past events beyond their control, has to pay significantly more for financial services, and is more likely to experience bankruptcy or individual voluntary arrangements.

Also, being more dependent on unreliable sources of financial support such as friends or family, leading to increased vulnerability and dependency.

Of those who felt financially excluded, 23% accepted a higher interest credit product.

Men borrow more with an average loan of nearly £10.00 compared to around £6,300 for women.

Men borrow more with an average loan of nearly £10.00 compared to around £6,300 for women.

In addition, 16% of people who were refused loans even at high interest rates resorted to loan sharks or illegal moneylenders. However, these people represent only 1% of the total population of the United Kingdom.

Research published by PwC in April concluded that 20.2 million people in the UK are struggling to access credit from traditional lenders, an increase of 50% on 2016.

Rob Pasco, Founder of Plend, said: “It is outrageous to see financial discrimination and exclusion on the rise, which is having a detrimental effect on society as a whole and widening the poverty gap.

Having a thin or invisible credit history is just one reason many people are financially excluded from accessing affordable credit products and basic financial services – the lending industry has no succeeded in solving this problem at a time when the need has never been greater due to the cost of life crisis’

Likewise, the survey revealed gaps in the country’s financial literacy. Data indicates that only 41% of adults know their credit score and 60% of the general population do not understand how credit scores are calculated.

According to PWC, 20.2 million people in the UK struggle to access credit from traditional lenders.

According to PWC, 20.2 million people in the UK struggle to access credit from traditional lenders.

MP Yvonne Fovargue, Chair of the All-Party Parliamentary Group on Debt and Personal Finance, commented on the report’s findings saying: “It is the responsibility of banks and the financial sector to demonstrate their willingness to serve the underserved and to the very least to provide a gateway to a more affordable financial future.

“It’s not only the right thing to do, it makes business sense; a better financial future means better customers.

The report comes as households face additional strain on their finances due to rapidly rising inflation and rising energy bills.

In May, food price inflation soared to 8.3% from 7%, an increase of almost £400 a year, its highest level since 2009.

The Institute of Grocery Distribution has warned that people may be skipping meals in a bid to cut spending.

This is at a time when people are still recovering financially from the pandemic.

In the report, 18% of people said they had to borrow money because of the pandemic. This figure rises to 35% for 18-34 year olds and more than doubles to 38% for ethnic minority groups.


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