Brits have been taking out personal loans for decades – to go on a well deserved holiday, to refurbish their houses, to buy their first cars. But how many people are doing it exactly? And is it more expensive now than it was 15 years ago?
Personal loans are a type of unsecured loan, in other words, a loan granted based on factors such as a person’s income and credit score, rather than being backed by anything concrete. In our report below, you’ll find exact figures from the Bank of England relating to these loans, spanning over the past 25 years. The charts and tables below contain the most recent available data, as at the start of each month.
The chart above shows the total amount of money being lent via unsecured loans in the UK each month for personal loans, dealership car finance, short term loans and credit cards. This monthly total has been generally increasing since the start of this dataset in 1993, despite decreasing between 2004 and 2010. In 2017, a total of £191 billion was lent, an increase of 31% compared to 2012 when £146 billion was lent in total.
In 2019, the total value of unsecured loans was at its highest ever recorded, at £208 billion. Two years later in 2020, a dip emerged due to the coronavirus pandemic, and the amount of money being lent dropped to the lowest rates since 1998. Between January and June 2020, £77 billion was lent out in total. Note that these figures don’t include student loans.
Quarterly personal loan write-offs
The amount of personal debt being written off has been relatively low in recent years. The most extreme year for write-offs was after the financial crisis in 2008-2009 when £3.75 billion was written off in total in 2010. After 2010, the write-off trend started to decrease. In 2017, only £610 million was written off.
In 2019, £1.58 billion was written off, and in the first half of 2020, a mere £390 million has been written off. If this trend continues for the rest of the year, it might be the first year since 2017 where the value of write-offs is below £1 billion.
The interest that is charged on personal loans has varied wildly over the years, with the interest rates on £10,000 loans being consistently lower than those on £5,000 loans.
£5,000 loans reached their peak interest rates in 2012, with an average of 13.2%. In 2017, the average was over a third lower at 8.4%.
Interest rates at the moment are historically low. The rate for £5,000 loans is currently at 7.80% and it’s been at an average of 7.86% for all of 2020. In 2019, the average was slightly lower at 7.84%, the lowest rate in over a decade.
Average interest rates for £10,000 loans are the lowest they’ve ever been as well. Since October 2016, they’ve stayed under 4%, and in 2020, the average interest rate is 3.53%. This is 55% lower than the rate’s peak in 2012, when it averaged 7.76%.
Postcode areas with the highest amount of personal loans per person
The areas with the largest populations will typically have the highest outstanding amount of personal loans. However, by looking deeper into the data, you can reveal a different story on a per capita basis.
Which regions have the highest amount of outstanding personal loans?
We looked into how much each region in the UK owes in personal debt. London is unsurprisingly in the lead, with over £6 billion in outstanding personal loans. The South East follows closely in second with over £5.7 billion outstanding. The North East has the smallest amount of personal loan debt, with just under £1.6 billion.
A decade in personal loans: Yearly figures 2010-2020
Have a look at the table below to compare average interest rates, total amount lent per year and total write-offs for the past decade.
Total amount lent
Average interest rate, £5,000 loans
Average interest rate, £10,000 loans
The Bank of England
The Money Charity
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Matt Mckenna Head of UK communications T: +44 20 8191 8806
Chris Lilly is a publisher at finder.com. He's a specialist in credit-based products including business and personal loans, mortgages and credit cards, and is passionate about helping UK consumers make informed decisions about their borrowing. In his spare time Chris likes forcing his kids to exercise more.
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