“Consumer lending and borrowing is set to increase this year, according to two industry experts, who have seen a decline in consumer borrowing and lending in the last two years”, Real Business is told.
When the first lockdown for the coronavirus began in March 2020, the UK and US saw a stark decline in the number of short term loans that we were approved and granted – but with covid restrictions easing significantly and an increase in both consumer and business confidence, we should see borrowing levels increase to new and possibly record levels.
In terms of consumer borrowing, Brits borrowed more than £72 billion in credit cards and £23 billion in personal loans – but this took a noticeable dive during the pandemic.
Coronavirus put a lot of things on hold
“The coronavirus pandemic put a lot of short term lending on hold, including personal loans, payday loans and credit cards,” explains Ben Sweiry, founder of finance provider, Dime Alley.
“Some of the UK’s most well-known lenders confirmed that they were pausing lending indefinitely, largely because they were unable to confirm income and employment of applicants, which was not always certain or easy to predict under the constant threat of covid.”
“Another consideration was possibly not having the full support of their financial backers, who like most, wanted to act more cautiously during the pandemic. In some cases, the backers behind large lenders pulled their money out or opted for more existing loans to be repaid before shelling out for more loans.”
“In terms of putting things on hold due to the pandemic, social activities were limited including parties, entertainment and even general daily expenses such as running a car were obsolete, with people confined to their homes.”
“In fact, general expenditure was so low, that there were record numbers of people paying off their other credit cards and debts, simply because they had so much disposable income. Figures show the repayment rate for credit cards during lockdown was the highest in its history.”
Lending growth driven by weddings, entertainment and travel plans
With covid restrictions significantly eased, large gatherings are able to take place across the country.
“For all the activities that were put on hold during the pandemic, these can now go ahead with full force,” says Richard Dent of online Fintech firm, Finger Finance.
“UK households are now eager to spend on holidays, going out and events like birthdays and weddings – and these are all things that stimulate more borrowing.”
“Travel in particular is an interesting one. With households likely to be opting for more than one holiday this year and an increased demand in travel abroad leading to a surge in holiday prices.”
“Now with an appetite from both lenders and consumers, we should see borrowing levels reach record numbers in the next year.”
