The Payday Loan Market In The U.K

The payday loan market in the U.K has grown massively in recent years and despite the collapse of Wonga in 2018, is still going strong. In this blog, we will be surmising for you the payday loan market of the U.K, providing you with facts, figures, statistics and general overviews of loan usage and demographics.


The Payday Loan Market In The U.K


The credit industry in the U.K is one of the most advanced and competitive in the world. It

contributes massively to the economy of the U.K and the Office of Fair Trading (OFT) estimates that the industry itself was worth somewhere in the region of £2 billion in 2011/2012. This constitutes a sizeable raise from the 2008/2009 estimation of £900 million.


Average Payday Loan Amount In The U.K


  • The average payday loan amount in the U.K is roughly around £260
  • £100 was the figure that was borrowed the most frequently, however, £300, £200, £150, and £50 payday loan amounts are also prevalent
  • It was recorded that 25% of the payday loans that were provided in the U.K were for less than £100
  • 50% of the payday loans were for less than £200
  • 90% were for less than £570

Interestingly, the average amount borrowed online differed substantially to the amount that was borrowed on the high street. £180 was the average amount of a high street payday loan, whilst £290 was the average amount borrowed online.


Average Duration Of Payday Loans In The U.K


  • The average duration of a payday loan in the U.K is 22 days
  • Only 10% of individuals borrowed their loan amount for less than a week
  • 90% borrowed for less than 34 days

The most common durations that fell between the two above brackets were:

  • 13-15 days
  • 28-31 days


What Are People Spending Their Payday Loans On?


The Competition and Markets Authority, or CMA, carried out extensive research on the typical payday loan user. They asked those who had recently taken out a loan what exactly they had spent their loan amount on, the results were quite surprising, as follows:

  • Food shopping, bills and general living expenses accounted for 53% of loan usage
  • Vehicle-related costs such as repairs or maintenance accounted for 10% of usage
  • General items, such as clothes, accounted for 7% of usage


Who Are Taking Out Payday Loans?


Generally, the majority of individuals who are currently taking out payday loans are male, roughly 60%. Of this 60%, 71% were aged between 18 and 44, with the mean age of all payday loan customers (men and women) being 35. What was also revealed by the CMA’s research was that of all loan customers, 37% of them had a total income (by household) of between £18,000 and £36,000, whilst a massive 28% of individuals had a total income (also per household) of £36,000 or above. It is worth noting that the average income in the U.K is £25,057.


Who Are The FCA And Why Are They So Important To The Market?


The FCA, or Financial Conduct Authority, are a government body who has overall authority over the entire short-term loan market(s). To operate within these markets a company must apply for authorisation from the FCA, if this is granted, they can continue trading however if this is not granted then they must cease all activity at once. The OFT (Office Of Fair Trading) used to be in charge of regulating the industry but handed over this responsibility to the FCA in 2014. The FCA quickly made massive changes to the way the industry was ran, making consumer-centric alterations that enhanced the customer experience and made the industry as a whole safer and fairer. The most important regulations and changes that were brought about as a result of the FCA are:

  • Companies must display risk warnings and run extensive affordability and credit checks on all applications and applicants
  • The continuous payment authority system used by lenders can only conduct a maximum of two unsuccessful collection attempts before the situation is escalated
  • The loanee will never get themselves a loan whereby they are paying double the amount that they borrowed i.e. if they take a loan of £400, then their total payment amount can never exceed £799
  • All accrued costs cannot go over a 0.8% a day threshold
  • Default charges cannot go over £15
  • Online lenders will be required to allow for their loan products to be included on price comparison sites (themselves having to be FCA regulated)
  • Summaries of costs must be provided to all customers

The payday loan market in the U.K is a complex and ever-growing market. This means that competition is fierce but we here at LoanPig believe that we are one of the best. We provide varied loan amounts, have flexible repayment terms and competitive rates. Apply for a loan with us here at LoanPig today to see how we can help you.