COVID-19: How it’s impacting the UK personal loans industry

As the country adjusts to the continued presence of COVID-19, the personal loans industry has been heavily affected. The market appetite for housing loans has drastically fallen and many personal loan providers are making drastic adjustments to a market that, while still present, is drastically different from what it was several months prior. The final word? COVID-19 has made a profoundly negative mark on personal finance – and lending is no exception.

We’re now seeing an industry valued at approximately 23 billion Pounds in the UK adjust quickly to a massive shift. Not all lenders are surviving this unique period in the industry’s history – and the ones that have thus far are seeing their service change drastically by necessity.

UK performance falls.

To the surprise of no expert in the industry, the pandemic is having a widespread and negative effect on the consumer credit market in most countries. The United Kingdom is affected just the same, with several key trends appearing in the market and among consumers.

Firstly, we’ve seen the expected occur: interest for consumer loans has dried up drastically. While reports vary, it’s generally accepted that as much as half the previous demand for personal loans has disappeared as the pandemic has taken root. This has coincided with the supply of credit and personal loans falling, with many lenders simply closing their services during the pandemic.

Lenders tighten criteria.

Those lenders who are still operating in the present market are generally making one key change: They’re offering loans and credit, but with much more stringent criteria than they previously were.

This is a sensible adjustment. With many adults in the UK having lost their jobs entirely due to COVID and others receiving only partial income when furloughed or in receipt of government-provided benefits, the confidence in which lenders can predict the repay rates of their customers is at an all-time low. For an industry that survives off its ability to predict the behaviour of its customers accurately, we’re now seeing unique influencing factors disrupt these predictions, leaving them unclear and unreliable.

Loan providers face administration.

Unfortunately for many lenders, the pressures of COVID-19 and the need to restrict access to loans from an already diminished customer base has been too much. We’re now seeing key industry players such as Sunny loans pushed to the edge of existence as a functioning business. In the case of Sunny, COVID-19 has coincided with a slew of complaints and compensation payout requests. In a short space of time, one of the UK’s largest lenders has been pushed into entering administration.

Experts adjust.

The combination of continued regulatory pressure and dwindling consumer interest is undeniably threatening the industry in its present state. With Sunny acting as a sobering example of the importance of customer satisfaction, loan providers who wish to weather the storm of COVID-19 will be well suited to return to the fundamental principles and service of their companies.

In the months ahead, there will still be a need across the UK for financial assistance. With many industries pressuring the government to provide a more uniform, consistent and long-lasting package of support to employed and self-employed adults, it is hoped that the presently uncertain and hard to predict client base in the loans industry will stabilise.

If personal lending experts in the UK are able to more accurately predict loan repayability rates amongst their clients, the criteria for accessing their services may be able to be relaxed, helping more adults to obtain the financial assistance they need during this uniquely challenging period in our world’s history.