Living in the UK isn’t the easiest thing at the moment, with the cost of living crisis making it a lot harder for people to get by. Times are tough for everyone, and there are a lot of changes happening across the UK that we might not have predicted. When faced with money problems, a lot of people tend to look at borrowing money in the form of payday loans or credit cards. However, the cost of living crisis has also impacted the loan industry itself, making it harder for people to receive the help they need. So, keep reading and find out more about how the loan industry has been affected by the UK living crisis in 2022.
Interest Rates
First and foremost, interest rates have skyrocketed, with it recently increasing to 3%. This means that all lending rates are impacted by this, causing total repayments to increase. It also means that your monthly repayments will increase as well, making it much less beneficial to seek out a loan. So, for example, if you were to take out a loan when the interest rates were lower at 2.5%, you’d pay back much less each month. But now that it’s increased to 3%, you’ll be paying back a lot more than you would previously. This can make it harder for people to find the right lender for them, as high interest rates are dissuading them from borrowing.
Affordability
In general, people have a lot less money thanks to the living crisis. This in turn means that people can’t afford to take out loans in the first place. Because people’s affordability is so low, lenders will deem them much riskier to lend to. People may also struggle to make their repayments because of the increased interest rates, making it extremely difficult for them to manage their money and debt. Not only will the high interest rates impact people’s affordability, but all of the other increased costs like energy and petrol have put a big strain on it too. Previously, you might have been fine to make your monthly repayments. But now with the added pressure of increased costs in other areas, you might find that you suddenly can’t make your payments as easily as you could before. Affordability is impacted by a lot of things, but the living crisis is one of the biggest contributors.
More Applications, Less Approvals
Because people now have less money in general, you may find that more people are applying for loans to help see them through. However, because interest rates have increased and affordability has gone down, more applications are being denied than ever before. So, although there is an increase in the number of applications being submitted, the amount of people receiving loans isn’t as high. This is mainly due to the fact that lenders are deeming people too risky to lend to because of their current financial situation. But this situation may have been caused by the living crisis in the first place, making it all come full circle. With less approvals, this means that loan companies are making less money, even if interest rates are higher. So, who knows what we can expect from these companies in the future and if they’ll be able to survive this crisis.
Demand Has Changed
Before the living crisis hit the UK, loan applications were typically for larger amounts of money. But now that affordability has gone down, interest rates are up, and people need help with daily expenses, requests are for much smaller amounts of money. This could work in people’s favour as they may be more likely to be approved, but it’s not great news for the loan companies themselves. Smaller amounts borrowed means less paid back overall, which could lead to lower profits. This shows just how much the demand for loans has changed in a very short period of time, as people are now needing them just to get by on a daily basis. Previously, loans were used for big expenses like cars and holidays, but now, people are needing them to help pay the bills.
The living crisis has had a huge impact on the UK, and it will probably continue to do so until things right themselves again. But in the meantime, it is having a devasting effect on lots of areas of life. Looking at how the demand for loans has changed from large to small in order to help with regular expenses shows just how bad things have gotten for a lot of people. Increased interest rates and fewer approved applications are also impacting the loan industry and their customers too. However, we can only hope that in the upcoming new year that things start to look up, and perhaps the living crisis can be a thing of the past.